comparative analysis and implication for the next phase … vol1 part 1 comparative ana… ·...

Part 1Comparative Analysis and Implication for the Next Phase of ABMF Sub-Forum 1 (2012–2013)

ASEAN+3 Bond Market Guide | Volume 1 | Part 1

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Contents

Economies Covered in the Comparative Analysis ....................................................................................1

Summary of Findings ...............................................................................................................................2A. Overall Assessment – Sound and Robust Market Infrastructure ................................................................2B. Sub-Forum 1: Summary of Findings ........................................................................................................10

Implications for the Next Phase of the ASEAN+3 Bond Market Forum Sub-Forum 1 (2012–2013) .......21

Details of SF1 Contents of Findings .......................................................................................................29I. Legal Tradition in the Domestic Capital Markets ....................................................................................30II. Governing Law for Domestic Bond Issuance ..........................................................................................30III. Competent Authority (Regulator) and Self-Regulatory Organizations of

Domestic Bond Markets ........................................................................................................................35IV. Role of the Self-Regulatory Organizations in Domestic Bond Markets ...................................................36V. Definition of Securities (Bonds) .............................................................................................................44VI. Event of Default and Payment Default ....................................................................................................48VII. Existence of the Meeting of Bondholders System ....................................................................................51VIII. The System of Commissioned Company, Bond Representative and Trustee .............................................52IX. Bankruptcy Procedures ...........................................................................................................................53X. Form of Bonds (Settlement Method) and Status (Bearer/Registered) ......................................................56XI. Exchangeability of Scripless Bonds to Physical Bonds .............................................................................57XII. Transfer of Securities (or Property Rights) and Finality of Settlement of Scripless Bonds ........................58XIII. Legal Basis and Definition of “Settlement and Clearing” .......................................................................63XIV. Registration and Issuing Approval Procedures of Bonds .........................................................................66XV. Necessity of Disclosure of Ultimate Beneficial Owner ...........................................................................77XVI. Foreign Exchange and Currency-Related Restrictions .............................................................................78XVII. Omnibus Securities Account and Nominee Concept ..............................................................................79XVIII. Main Trading Places (Over the Counter or Exchange) and Existence of Exchange trading .....................80XIX. Listing of Bonds and Obligation for Market Listing (Domestic Market) ..................................................80XX. Necessity of Credit Rating for the Issuing of Bonds ................................................................................81XXI. Documentation Language .......................................................................................................................82XXII. Concept/Definition of Professional or Institutional investors .................................................................83XXIII.Definition of Public Offering (and Private Placement or Exempt Regime) ...............................................86

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XXIV. Existence of Professional Investors-Only Market ....................................................................................89XXV. Market Capitalization – Size of the Local Currency Bond Market (as of March 2011) ............................90XXVI. Size of Foreign Currency Bond Market (as of March 2011) ....................................................................90XXVII. Islamic Finance related Issues ................................................................................................................90

Appendix ...............................................................................................................................................93

Reference ..............................................................................................................................................94

Figures and TableFigures

Figure 2.1 ASEAN+3 Government Bond Market Infrastructure Diagram .....................................................11Figure 2.2 Regional Standardization of Documentation ............................................................................22Figure 2.3 Exempted Market versus Full Disclosure Market ......................................................................22Figure 2.4 Comparative Structure of US Domestic and Offshore Markets ...................................................23Figure 2.5 Status Quo of Asean+3 Bond Markets ...................................................................................24Figure 2.6 Connecting the Professional Market Elements in the Region .....................................................24Figure 2.7 Creation of an Intra-Regional Bond Market ..............................................................................25Figure 2.8 Mutual Recognition Examples (1), (2), (3) ..............................................................................26

TablesTable 1.1 Economies Covered in the Comparative Analysis ........................................................................1Table 1.2 Existence of a Clear Definition of Securities (Bonds) ..................................................................2Table 1.4 Forms and Status of Bonds across Economies ..........................................................................4Table 1.5 Exchangeability of Scripless Bonds to Physical Bonds .................................................................5Table 1.6 Existence of a Concept of Bondholder Meeting ..........................................................................6Table 1.7 Existence of Concepts of Commissioned Company, .....................................................................

Bond Representative and Trustee ............................................................................................6Table 1.8 Obligation to Acquire Credit Rating upon Bond Issuance .............................................................6Table 1.9 Main Market Authorities across covered Economies ...................................................................7Table 1.10 Self-Regulatory Organizations across ASEAN+3 Bond Markets ....................................................7Table 1.12 Foreign Exchange and Currency-Related Restrictions ..................................................................8Table 2.1 Over-the-Counter Market versus Exchange Market ...................................................................10Table 2.2 Existence of Exempt Regimes ................................................................................................12Table 2.3 Status of Concepts of Commissioned Company, Bondholder Representative and Trustee ............12Table 2.4 Legal Tradition .....................................................................................................................13Table 2.5 Requirements for Identifying Investors and Beneficial Owners ....................................................14Table 2.6 Existence of Omnibus Accounts or Nominee Concept ...............................................................14Table 2.7 Existence of Exempt Regimes ................................................................................................15Table 2.8 Existence of the Concept of Professional Investor ...................................................................16Table 2.9 Existence of Professional Investor-Only Market ........................................................................17Table 2.10 Definitions of Self-Regulatory Organizations ............................................................................17Table 2.11 Existence of the Islamic Finance Market .................................................................................20

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ASEAN+3 Bond Market Guide | Volume 1 | Part 1 ASEAN+3 Bond Market Guide | Volume 1 | Part 1

Details of SF1 Contents of Findings: Tables Table 1. Legal Tradition in the Domestic Capital Markets .......................................................................30Table 2. Governing Law for Domestic Bond Issuance ............................................................................30Table 3. Competent Authority (Regulator) and Self-Regulatory Organizations of Domestic Bond Markets ....35Table 4. Role of Self-Regulatory Organizations in Domestic Bond Markets ...............................................36Table 5. Definition of Securities (Bonds) ..............................................................................................44Table 6. Event of Default and Payment Default ....................................................................................48Table 7. Existence of Bondholders Meeting System ..............................................................................51Table 8. The System of Commissioned Company, Bond Representative and Trustee .................................52Table 9. Bankruptcy Procedures .........................................................................................................53Table 10. Form of Bonds (Settlement Method) and Status (Bearer/Registered) .........................................56Table 11. Exchangeability of Scripless Bonds to Physical Bonds ...............................................................57Table 12. Transfer of Securities (or Property Rights) and Finality of Settlement of Scripless Bonds ...............58Table 13. Legal Basis and Definition of “Settlement and Clearing” ...........................................................63Table 14. Registration and Issuing Approval Procedures of Bonds ............................................................66Table 15. Necessity of Disclosure of Ultimate Beneficial Owner................................................................77Table 16. Foreign Exchange and Currency-Related Restrictions ................................................................78Table 17. Omnibus Securities Account and Nominee Concept .................................................................79Table 18. Main Trading Places (Over the Counter or Exchange) and Existence of Exchange Trading ..............80Table 19. Listing of Bonds and Obligation for Market Listing (Domestic Market) .........................................80Table 20. Necessity of Credit Rating for the Issuing of Bonds ..................................................................81Table 21 Documentation Language .....................................................................................................82Table 22. Concept and Definition of Professional or Institutional investors ................................................83Table 23. Definition of Public Offering (and Private Placement or Exempt Regime) .....................................86Table 24. Existence of Professional Investors-Only Market ......................................................................89Table 25. Market Capitalization – Size of Local Currency Bond Market (as of March 2011) ($ billion) .........90Table 26. Size of Foreign Currency Bond Market (as of March 2011) ($ billion) .........................................90Table 27. Islamic Finance-Related Issues ..............................................................................................90


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This report mainly discusses the harmonization and standardization of bond markets of 10 economies with existing bond markets in the Association of Southeast Asian Nations, People’s Republic of China, Japan and Republic of Korea (ASEAN+3).

Table 1.1 Economies Covered in the Comparative Analysis

Economy

Economies Subject to Comparative Analysis

(Ten Scripless Securities Markets)Economies Covered Under

Bond Market Guides 1 China, People’s Rep. of ü ü

2 Hong Kong, China ü ü

3 Indonesia ü ü

4 Japan ü ü

5 Korea, Rep. of ü ü

6 Malaysia ü ü

7 Philippines ü ü

8 Singapore ü ü

9 Thailand ü ü

10 Viet Nam ü ü

11 Lao PDR – ü (voluntary submission for reference)aa At the outset, it is understood that the bond markets of Brunei Darussalam, Cambodia, Lao People’s Democratic Republic (PDR),

and Myanmar are in the planning stage for creation or in the early stages of development; therefore, as discussed in the ASEAN+3 Bond Market Forum (ABMF) in the past, the ADB secretariat did not ask these developing markets to provide market information. Instead, ABMF members and experts focused on sharing the information collected from these developing markets to support their initiatives to establish or develop their respective bond markets. This is the reason the ABMF secretariat held workshops in Brunei Darussalam and Lao PDR in May and June 2011. However, this did not entirely prevent the two economies from providing any market information to be included in the market guides. Lao PDR proactively and voluntarily submitted their bond market guide as reference.

Source: ADB Consultants, based on research materials and market visit information.

Economies Covered in the Comparative Analysis

ASEAN+3 Bond Market Guide | Volume 1 | Part 1ASEAN+3 Bond Market Guide | Volume 1 | Part 1

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A. Overall Assessment – Sound and Robust Market Infrastructure

All of the 10 securities markets covered under this research project have built robust market infrastructures, including legal and operational systems to secure transactions in the domestic bond market over the past 10 years.

In almost all markets, key legal and regulatory frameworks and related systems are in place. The following tables detail some of the features of these key bond-market infrastructures.

For instance, a clear definition of securities (bonds) is considered to be a fundamental base and condition for the sound development of the bond market. Most of the jurisdictions have a specific definition of securities, or are striving to further improve or clarify the definition of securities.

Table 1.2 Existence of a Clear Definition of Securities (Bonds)

Jurisdiction Existence of a Clear Definition of Securities (Bonds)

People’s Republic of China

Securities concepts may differ by industry or by competent authority in China. The Corporation Law and Enterprise Law co-exist and, hence, either may set rules for issuance of securities, depending on the industry, issuer, and type of security.

The official definition of securities is provided in the Securities Law of PRC, which was revised in 2005.

The present law shall be applied to the issuance of and transactions in stocks, corporate bonds, as well as any other securities lawfully recognized by the State Council within the territory of the PRC. However, some bonds do not fall under the Securities Law.In case where there is no such provision in the present law, the provisions of the Corporation Law and other relevant laws and administrative regulations shall be applied.

Hong Kong, China For bonds to be listed on the Hong Kong Stock Exchange or cleared through the Central Moneymarkets Unit (CMU), they must satisfy the criteria as set out in, among others, the Listing Rules and CMU Service Reference Manual (which is accessible to CMU members only), respectively. Also, a definition of securities is laid down in the Securities and Futures Ordinance (SFO) of the Securities and Futures Commission (SFC).

Indonesia The definition of securities is not confined to a single law. Original relevant definitions found in the commercial code left by the Dutch, and remaining in force are the following: Promissory note (PN), cheque, and bill of exchange.

There is no mention of corporate bonds and debt instruments in the Company Law; however, they are often described or covered in the Articles of Association of companies.

Summary of Findings

continued on next page

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ASEAN+3 Bond Market Guide | Volume 1 | Part 1 ASEAN+3 Bond Market Guide | Volume 1 | Part 1ASEAN+3 Bond Market Guide | Volume 1 | Part 1

Jurisdiction Existence of a Clear Definition of Securities (Bonds)The clearest definition of securities can be found in the Capital Market Law No. 8 (1995). Pursuant to the Capital Market Law, securities are classified as PNs, commercial paper (CP), shares, bonds, evidences of indebtedness, participation units of collective investment contracts, futures contracts related to securities, and all derivatives of securities. Today, the distinction of debt instruments can be divided into the capital market and the money market: (1) the capital market covers bonds, (2) the money market covers PN, medium-term notes (MTN), CP, Certificate of Central Bank (SBI, Sertifikat Bank Indonesia); most instruments have been introduced by foreign bank participants in recent years. MTN and CP are synonymous for all intents and purposes; legal treatises exist but there are no statutory definitions of these instruments.

Japan The Companies Act defines corporate bonds.

A uniform legal framework for all types of securities exists.

Distinctions between dematerialization or immobilization and physical securities are clear.

Legal ownership structure of dematerialized or immobilized securities is clearly stipulated.

Republic of Korea The revised Commercial Act (to take effect in 2012) provides a basis for corporate bonds diversity.

This should resolve the discrepancy in the definition of securities between the Commercial Act and the Financial Investment Services and Capital Markets Act (FSCMA).

Malaysia Under section 2(1) of the Capital Markets and Services Act 2007, securities are defined as: (a) debentures, stocks or bonds issued or proposed to be issued by any government; (b) shares in or debentures of, a body corporate or an unincorporated body; or (c) unit trusts or prescribed investments, and includes any right, option or interest in respect thereof, but does not include futures contracts.

Debentures are also stipulated in article 125 of the Companies Act 1965.

Philippines Under section 3 of the Securities Regulation Code (SRC), securities are shares; participation or interests in a corporation or in a commercial enterprise or profit-making venture and evidenced by a certificate; contract; or instrument, whether written or electronic in character.

The Philippine Dealing and Exchange (PDEx) Rules for the Fixed Income Securities Market, as amended (PDEX Rules), define securities as fixed-income securities, including government securities.

Singapore Securities are defined in the Securities and Futures Act (SFA) in sections 2(1), 196A, 214, and 239.

Thailand Section 4 of the Securities and Exchange Act B.E. 2535 stipulates the definition of securities.

Viet Nam Pursuant to article 3 of the amended and supplemented Securities Law No. 62/2010/QH12 and article 6 of Securities Law No. 70/2006/QHll, securities mean evidence from an issuing organization certifying the lawful rights and interest of an owner with respect to assets or capital portion. Securities may take the form of certificates, book entries or electronic data, and shall comprise the following types: 1) shares, bonds and investment fund certificates; 2) share purchase rights (rights issue), warrants, call options, put options, future contracts, groups of securities and securities indices; 3) investment capital contribution contracts; and 4) other types of securities stipulated by the Ministry of Finance.


Trades can be executed efficiently in a secure manner; operations and practices in the markets are comparable to other developed bond markets. All of the 10 securities markets now have a scripless securities system. Notwithstanding, some still have room for further improvement in maximizing the benefits available from such systems.

Table 1.3 Existence of Scripless Securities System

Jurisdiction Existence of Scripless Securities SystemPeople’s Republic of China Yes

Hong Kong, China Yes

Indonesia Yes

Japan Yes

Republic of Korea Yes

Malaysia Yes

Table 1.2 continuation


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Jurisdiction Existence of Scripless Securities SystemPhilippines Yes

Singapore Yes

Thailand Yes

Viet Nam YesSource: ADB Consultants, based on research materials and market visit information.

The introduction of scripless securities led to the issuance, keeping and transfer of bonds on a book-entry basis in these markets. This reduces operational risk significantly. In this context, it is noteworthy that the People’s Republic of China (China) and Japan have implemented a ‘registered notes only’ policy. In addition, from the viewpoint of exchangeability of scripless bonds to physical bonds, it is observed that scripless bonds can no longer be exchanged to physical bonds in China and Japan. It seems that these two countries are pursuing the same policy direction.

Table 1.4 Forms and Status of Bonds across Economies

JurisdictionForm of the Bonds(Settlement Method)

Status (Bearer/Registered)


• Book-entry Registered.(Bonds are generally getting scripless in a central register and registered in an account holder’s or bondholder’s name; some older bearer bonds may still exist. As for China Central Depository and Clearing (CCDC)-settled bonds in the China Inter-bank Bond Market, CDCC centralized the management of the bearer bond library in 1998, and 2001 saw the end of bearer bonds in this market.)

Hong Kong, China • Book-entryform(dematerialized)forExchangeFundpaper,and• Globalnoteformforcorporatebonds

Bearer/Registered

Indonesia • Bookentry(from2000)• Physicalcertificatestillexist(issuedpriorto2000)

Bearer/Registered

Japan • Book-entry(Completelydematerialized,exceptforafewnon-centralsecurities depository [CSD] settled private placed notes)

Registered

Republic of Korea • Book-entry Dematerialized securities: Securities which are not issued in paper

form and where ownership is held and is transferable by book entry in a ledger maintained by a CSD or account management institution.

Immobilized securities: Physical securities and non-certificated securities held and transferred by book entry in a ledger maintained by a CSD or account management institution.

Bearer/Registered

Malaysia • Listedbonds:BookentryatBursaMalaysiaDepository• Unlisteddebtsecurities:BookentryatBankNegaraMalaysia(BNM)

Basically, registered.Cagamas papers are unsecured bearer bonds issued by Cagamas, the national mortgage corporation established in 1986 to promote the secondary mortgage market in Malaysia.

Philippines • GovernmentSecurities:BookentryintheRegistryofScriplessSecurities (RoSS) or in the Philippine Depository and Trust Corporation (PDTC)

• ScriplessCorporateBonds:BookentryinPDTC• PhysicalCorporateBonds:Endorsementandactualdeliveryof

physical certificates with duly notarized Deed of Assignment

Bearer/Registered. Dematerialization/immobilization versus physical securities: both equities and debt securities are legally recognized in physical and dematerialized forms. In the organized market for debt securities, however, debt securities must be in dematerialized form and cannot be listed if the same are still in physical form, even if immobilized.



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JurisdictionForm of the Bonds(Settlement Method)

Status (Bearer/Registered)

Singapore • Bookentryforgovernmentbonds• TheCentralDepositoryPte.(CDP)holdsuniversalcertificatesfor

physical bonds

Bearer/Registered.A foreign issuer is normally required to appoint a paying agent in Singapore while debt securities are quoted on the Exchange and upon the issue of debt securities in definitive form. The Exchange may accept other arrangements to enable definitive certificate holders of the bearer debt securities in Singapore to be paid promptly.

Thailand • Bookentry• Promissorynotes(PNs)andcommercialpapersarephysical,bearer

instruments

In accordance with sections 225 to 228 of the Securities and Exchange Act (SEA), immobilization in the Thailand Securities Depository (TSD) system has been arranged through the transfer of securities by book entry.

The transfer of securities by book entry shall be deemed to be the delivery of securities, which constitutes the legal basis for the validity of securities transfer under section 199 and section 51 of the SEA. Moreover, securities transferred into the name of the TSD shall be presumed to be securities held by the TSD on behalf of its members or for any customers of its members.

However, there is no explicit legislation for the dematerialization of securities.

Bearer/Registered.PNs are physical, bearer instruments issued by banks and other financial institutions.

Viet Nam • Bookentry• Municipalbondsarephysical,bearerinstruments.• Corporatebondsandstate-ownedenterprises(SOE)bondscanbe

held in bearer or registered form.• ListedcorporatebondshavetobedepositedattheVietnam

Securities Depository to be eligible for trading on the Exchanges.

Bearer/Registered


Table 1.5 Exchangeability of Scripless Bonds to Physical Bonds

Jurisdiction Exchangeability of Scripless Bonds to Physical BondsPeople’s Republic of China No


Indonesia Yes

Japan No


Malaysia Yes

Philippines Yes

Singapore Yes

Thailand Yes

Viet Nam YesSource: ADB Consultants, based on research materials and market visit information.

A bondholder meeting concept is one of the typical indicators of the maturity of a bond market. Ten out of Eleven jurisdictions already feature the bondholder-meeting concept as a basic infrastructure of their respective bond markets.


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Table 1.6 Existence of a Concept of Bondholder Meeting

Jurisdiction Existence of a Concept of Bondholder Meeting People’s Republic of China YesHong Kong, China YesIndonesia YesJapan YesRepublic of Korea YesMalaysia YesPhilippines YesSingapore YesThailand YesViet Nam Meeting concept may be existent, but has not been established as a system.Source: ADB Consultants, based on research materials and market visit information.

In addition, the existence of concepts of commissioned company, bond representative and trustee is important for investor protection in the bond markets. Most of the jurisdictions have such concepts in place, even though they may vary in name and individual features.

Table 1.7 Existence of Concepts of Commissioned Company, Bond Representative and Trustee

JurisdictionExistence of

Commissioned Company/Bond Representative/Trustee ConceptPeople’s Republic of China YesHong Kong, China YesIndonesia YesJapan YesRepublic of Korea YesMalaysia YesPhilippines YesSingapore YesThailand YesViet Nam -Source: ADB Consultants, based on research materials and market visit information.

At the same time, a credit rating system also plays an important role in the bond market. Particularly, it is considered that developing markets generally require a compulsory credit rating system for investor protection. Many of the developing markets in the region have such system.

Table 1.8 Obligation to Acquire Credit Rating upon Bond Issuance

Jurisdiction Obligation to Acquire Credit Rating upon Bond IssuancePeople’s Republic of China

Yes.

Hong Kong, China No.

Indonesia Yes.

Japan No. But, TOKYO PRO-BOND Market Listing requires a credit rating.

Republic of Korea Yes.

Malaysia Yes.


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Jurisdiction Obligation to Acquire Credit Rating upon Bond IssuancePhilippines Yes.

Singapore No. But, as a foreign debt-securities listing requirement of the Singapore Exchange (SGX), the issue of debt securities must have a credit rating of investment grade and above.

Thailand Yes.

Viet Nam No.Source: ADB Consultants, based on research materials and market visit information.

Regulators in these markets are encouraged to further eliminate legal and regulatory uncertainties, and to maintain transparency of rules and practices in each domestic market.

Table 1.9 Main Market Authorities across covered Economies

Jurisdiction Main Market AuthorityPeople’s Republic of China • Inter-bankBondMarket(OvertheCounter):People’sBankofChina(PBOC)

• ExchangeMarket(ShanghaiStockExchangeandShenzhenStockExchange):China Securities Regulatory Commission (CSRC)

• ForeignCurrencyPolicy:PBOC,StateAdministrationofForeignExchange

Hong Kong, China Hong Kong Monetary Authority

Indonesia Capital Market and Non-Bank Financial Service Supervisory Agency

Japan Financial Services Agency

Republic of Korea Financial Services CommissionFinancial Supervisory Service

Malaysia Securities Commission Malaysia

Philippines Securities and Exchange Commission

Singapore Monetary Authority of Singapore

Thailand Ministry of Finance Securities and Exchange Commission

Viet Nam State Securities Commission (SSC) (Since March 2004, the SSC is under the jurisdiction of the Ministry of Finance of Viet Nam)


Aiding the functioning of the bond markets, the role of self-regulatory organizations (SROs) in each domestic market is critically important. In the region, many of the jurisdictions have established SROs.

Table 1.10 Self-Regulatory Organizations across ASEAN+3 Bond Markets

Jurisdiction Name of SRO Membership Sets Rules Enforcement People’s Republic of China NAFMII Yes Yes Yes

Hong Kong, China N/A N/A N/A N/A

Indonesia IDXKPEIKSEI

YesYesYes

YesYesYes

YesYesYes

Japan JSDATSETOKYO AIM

YesYesYes

YesYesYes

YesYesYes

Republic of Korea KOFIAKRX

YesYes

YesYes

YesYes



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Jurisdiction Name of SRO Membership Sets Rules Enforcement Malaysia Bursa Malaysia

ACI Malaysia (quasi)YesYes

YesYes

YesYes

Philippines PDS Group (PDEx) Yes Yes Yes

Singapore SGX Yes Yes YesThailand ThaiBMA

ExchangesYesYes

YesYes

YesYes

Viet Nam VBMA Yes Yes –ACI = Persatuan Pasaran Kewangan Malaysia; IDX = Indonesia Stock Exchange; JSDA = Japan Securities Dealers Association; KOFIA = Korea Financial Investment Association; KPEI = Indonesia Clearing and Guarantee Corporation; KRX = Korea Exchange; KSEI = Indonesian Central Securities Depository, Kustodian Sentral Efek Indonesia; NAFMII = National Association of Financial Market Institutional Investors; PDEx = Philippine Dealing and Exchange; SGX = Singapore Exchange; SRO = self-regulatory organization; ThaiBMA = Thailand Bond Market Association; TSE = Tokyo Stock Exchange; VBMA = Vietnam Bond Market AssociationSource: ADB Consultants, based on research materials and market visit information

Bond markets in the region are distinct in many ways, such as in governing laws and responsible regulators based on their legal tradition and their own market needs, including documentation languages.

Table 1.11 Documentation Languages

Jurisdiction Main Language Alternative LanguagePeople’s Republic of China ChineseHong Kong, China English ChineseIndonesia Bahasa Indonesia EnglishJapan Japanese* English for TOKYO-PRO BOND Market ListingRepublic of Korea Korean (Hangul) English for Qualified Institutional Buyer MarketMalaysia EnglishPhilippines EnglishSingapore EnglishThailand Thai EnglishViet Nam Vietnamese* Japan is in the course of introducing a partial English based documentation for disclosure from April 2012; Although the information

for securities should be submitted in Japanese, most part of the disclosure information for issuer (including already disclosed reference information) can be submitted in English, except for a certain information. (Non-resident issuers’ burden will be reduced)


Foreign institutional investors are already able to access all ASEAN+3 active markets for bond investments in local currency, with the exception of the People’s Republic of China. Having said so, the renminbi bond market in Hong Kong has been growing. Investors can access one or many ASEAN+3 markets, and buy corporate or government bonds, if they prefer, in local currency.

Table 1.12 Foreign Exchange and Currency-Related Restrictions

JurisdictionForeign Exchange Rate

Floating

Restrictions on Foreign Remittance(1. Own currency)

(2. Investment principal)(3. Coupons or dividends)

Currencies eligible for CLS

SettlementPeople’s Republic of China

Government-controlled floating, rate referring to currency basket

1. Restricted –2. Restricted for a certain period of time after investment3. Restricted for a certain period of time after investment

Hong Kong, China Link to US dollar (Currency Board System)

1. No restriction Yes2. No restriction3. No restriction



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Floating


(2. Investment principal)(3. Coupons or dividends)

Currencies eligible for CLS

SettlementIndonesia Floating 1. Restricted. (Rupiah foreign exchange trades must be done by Indonesian

domestic banks; rupiah remittance between foreign banks is prohibited)–

2. No reporting required for repatriation of benefits. 3. Reporting required(*) Real-demand principle applies to inbound foreign exchange or buying

Indonesian rupiah only.Japan Floating 1. No restriction Yes

2. No restriction. (ex post facto report required)3. No restriction. (ex post facto report required)

Republic of Korea Floating 1. Restricted Yes2. No restriction3. No restriction

Malaysia Managed float against a basket of currencies, following the de-pegging of the ringgit

1. Restricted (All remittances out of the country must be made in foreign currency). Real-demand principle applies to inbound FX only.

–

2. No restriction for non-resident investors to repatriate in foreign currency3. No restriction for non-resident investors to repatriate in foreign currency

Philippines Floating 1. Restricted. Registration with the Bangko Sentral ng Pilipinas (BSP) for issuance of Bangko Sentral Registration Document (BSRD) on per transaction basis is required to qualify for automatic conversion of peso sale or interest into foreign exchange for outward repatriation.

–

2. Registration with BSP for issuance of BSRD on per transaction basis is required to qualify for automatic conversion of peso sale or interest into foreign exchange for outward repatriation.

3. Interest automatically qualifies for outward repatriation if principal investment has BSRD.

Singapore Floating against basket of currencies

1. No restrictions (investor can hold Singapore dollar in Tokyo, for example) Yes2. No restriction3. No restriction

Thailand Managed Floating 1. Restricted –2. Reporting is required.3. Reporting is required.

Viet Nam Controlled Floating 1. Restricted –2. Restricted for certain period of time after investment3. No restriction(Viet Nam issue is based on availability of foreign currency)


To illustrate such distinction, the transfer of ownership of bonds may not be the same as in the rules governing the finality of settlement; almost all of the markets have established their specific market practices. For details, please refer to “SF1: Contents of Findings, XII. Transfer of Securities (or Property rights) and Finality of Settlement of Scripless Bonds.”

Although actual condition regarding default recognition may be different by the terms and conditions of the bonds and by jurisdiction, default procedures are usually well disclosed in the bonds issuance documentation in many jurisdictions in the region. In many jurisdictions and bonds issuance documentation, these default procedures do not usually deviate from the documentation standards of international bond issues. In some cases, however, there are still uncertainties regarding default recognition and procedures. On the other hand, the status of development of bankruptcy-related legislation in the region differs between jurisdictions.


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Generally, the companies act and/or bankruptcy law and/or related laws, where applicable, will be quoted in the trust deed or similar documents to guide investors in making informed decisions. But in some jurisdictions in the region, bankruptcy-related law and procedures are still in the development stage. A greater understanding and further analysis of bankruptcy-related law and procedures across regional markets is important for future consideration.

For details, please refer to “SF1: Contents of Findings, VI. Event of Default/Payment Default” and “SF1: Contents of Findings, IX. Bankruptcy Procedures”

B. Sub-Forum 1: Summary of Findings

1. Over-the-Counter Market and Exchange MarketBonds can be listed on the stock exchanges in many markets, but most of the instruments are traded on the over-the-counter (OTC) market. The OTC market remains the main trading place for bond markets, but selected exchanges in Republic of Korea and China have begun to establish significant market segments. For instance, transactions in China’s Inter-bank Bond Market involve the trade system of the China Foreign Exchange Trade System (CFETS) and money-brokers, while exchange-market trading is done through the Shanghai Stock Exchange (SSE) and Shenzhen Stock Exchange (SZSE). In addition, since July 2011, Singapore government securities (SGS) can be traded on the Singapore Exchange (SGX), with particular focus for retail investors. On the other hand, Republic of Korea will launch the Qualified Institutional Buyer (QIB) market in May 2012 for professional investors, using the OTC trading platform of the Republic of Korea Financial Investment Association (KOFIA); the market will provide for exemption from the full-disclosure regime in Republic of Korea.

Table 2.1 Over-the-Counter Market versus Exchange Market

Jurisdiction OTC Market as a Main Trading Place Exchange-Market TradingChina Yes. Inter-bank Bond Market, not directly available to foreign investors.

Domestic institutions are permitted to trade in OTC market.Yes (SSE and SZSE).

Hong Kong, China Yes Yes (HKEx). But only accounts for a relatively small portion of all the trading in bonds.

Indonesia Yes Possible but not observed.Japan Yes No.Republic of Korea Yes Yes (KRX). Government Bonds.Malaysia Yes (Only for unlisted debt securities) No.

Philippines Yes (Regulated OTC) No.Singapore Yes Yes. (Government bonds, mainly for retail investors, since

July 2011)

Thailand Yes. BEX provides electronic platform for OTC fixed-income trading named Fixed Income and Related Securities Trading System (FIRST)

No.

Viet Nam Yes. But not yet regulated. No.BEX = Bond Electronic Exchange; SZSE = Shenzhen Stock Exchange; HKEx = Hong Kong Exchanges and Clearing; KRX = Korea Exchange; OTC = over the counter; SSE = Shanghai Stock ExchangeSource: ADB Consultants, based on research materials and market visit information.

The following diagram provides further illustration on the trading to settlement infrastructure across the observed economies.

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Ross

STP

Facil

ity

BTBT

r-ROS

S

PDEx

eDVP

JASD

ECPS

MS

JASD

ECPS

MS

CFET

SHK

MA

CMU

TCH

PTI

TSD

PTI

HNX

BIDV

Com

mer

cial

Bank

BOT

BAHT

NET

MAS

MEP

S+

RTGS

BSP

PhilP

ass

BOK

BOK-

Wire

+

BOJ

BOJ-

NET

BIBI

-RTG

SHK

MA

CHAT

SPB

OCHV

PS

CNAP

S

BOJ

BOJ-

NET

BNM

RENT

AS-

IFTS

TCH

PTI

BMS

ETP

Toky

oOT

CM

anila

OTC

PRC

OTC

Inte

r-ban

kBo

nd M

arke

t

Thai

land

OTC

Indo

nesia

OTC

Mal

aysia

OTC

MAS

MEP

S+

SGS

BNM

RENT

AS-

SSDS

BIBI

-SSS

SHK

MA

CMU

Hong

Kon

gOT

CSe

oul

OTC

KRX

SSE

and

SZSE

BRU,

CAM

, LAO

, MYA

VIE

MAL

SIN

JPN

PRC

THA

KOR

HKG

PHI

INO

Brun

ei

Daru

ssal

amCa

mbo

dia

Lao

PDR

Mya

nmar

(Net

ting)

Note

:

Exch

ange

Mar

ket

Dire

ct in

ters

yste

m c

onne

ctio

n

Cent

ral B

ank

Indi

rect

con

nect

ion.

Trad

e da

ta (b

ond

settl

emen

t ins

truct

ions

) are

ent

ered

to C

SD b

y ag

ent c

usto

dian

s.

Com

mer

cial B

ank

BAHT

NET

= B

ank

of T

haila

nd A

utom

ated

High

Val

ue T

rans

fer N

etwo

rk; B

I = B

ank

Indo

nesia

; BID

V =

Ban

k fo

r Inv

estm

ent a

nd D

evel

opm

ent o

f Vie

tnam

; BI-S

SSS

= B

ank

Indo

nesia

-Scr

iple

ss S

ecur

ities

Set

tlem

ent S

yste

m; B

MS

=

Burs

a M

alay

sia S

ecur

ities

; BNM

= B

ank

Nega

ra M

alay

sia; B

OJ =

Ban

k of

Japa

n; B

OJ-N

ET =

BOJ

-Fin

ancia

l Net

work

Sys

tem

; BOK

= B

ank

of K

orea

; BOK

-Wire

+ =

New

Ban

k of

Kor

ea F

inan

cial W

ire N

etwo

rk S

yste

m; B

OT =

Ban

k of

Th

aila

nd; B

SP =

Ban

gko

Sent

ral n

g Pi

lipin

as; B

Tr =

Bur

eau

of Tr

easu

ry; C

CDC

= C

hina

Cen

tral D

epos

itory

and

Cle

arin

g; C

CP =

Cen

tral C

ount

erpa

rty; C

FETS

= C

hina

For

eign

Exc

hang

e Tra

de S

yste

m; C

HATS

= C

lear

ing

Hous

e Au

tom

ated

Tra

nsfe

r Sys

tem

; CM

U =

Cen

tral M

oney

mar

kets

Uni

t; CN

APS

= C

hina

Nat

iona

l Aut

omat

ic Pa

ymen

t Sys

tem

; CSD

CC =

Chi

na S

ecur

ities

Dep

osito

ry a

nd C

lear

ing

Corp

orat

ion;

eDV

P =

ele

ctro

nic

deliv

ery v

ersu

s pa

ymen

t; ET

P =

ele

ctro

nic

tradi

ng p

latfo

rm; H

KMA

= H

ong

Kong

Mon

etar

y Au

thor

ity; H

NX =

Han

oi S

tock

Exc

hang

e; H

VPS

= H

igh V

alue

Pay

men

t Sys

tem

; IFT

S =

Inte

rban

k Fu

nds

Trans

fer S

yste

m; J

ASDE

C =

Japa

n Se

curit

ies

Depo

sitor

y Ce

nter

; JGB

CC =

Japa

n Go

vern

men

t Bon

d Cl

earin

g Co

rpor

atio

n; K

RX =

Kor

ea E

xcha

nge;

KSD

= K

orea

Sec

uriti

es D

epos

itory

; MAS

= M

onet

ary A

utho

rity o

f Sin

gapo

re; M

EPS

= M

AS E

lect

roni

c Pa

ymen

t Sys

tem

; OTC

= o

ver t

he c

ount

er; P

BOC

= P

eopl

e’s

Bank

of

Chi

na; P

DEx =

Phi

lippi

ne D

ealin

g an

d Ex

chan

ge; P

DTC

= P

hilip

pine

Dep

osito

ry a

nd Tr

ust C

orpo

ratio

n; P

hilP

aSS

= P

hilip

pine

Pay

men

ts a

nd S

ettle

men

t Sys

tem

; PSM

S =

Pre

-Set

tlem

ent M

atch

ing

Syst

em; P

TI =

pos

t-tra

de in

tegr

atio

n;

RENT

AS =

Rea

l-tim

e El

ectro

nic

Trans

fer o

f Fun

ds a

nd S

ecur

ities

; RoS

S =

Reg

istry

of S

crip

less

Sec

uriti

es; R

TGS

= re

al-ti

me

gros

s se

ttlem

ent;

SGS

= S

inga

pore

gov

ernm

ent s

ecur

ities

; SSD

S =

Scr

iple

ss S

ecur

ities

Dep

osito

ry S

yste

m;

SSE

= S

hang

hai S

tock

Exc

hang

e; S

TP =

stra

ight-t

hrou

gh p

roce

ssin

g; S

ZSE

= S

henz

hen

Stoc

k Ex

chan

ge; T

CH =

Tha

iland

Cle

arin

g Ho

use;

TSD

= T

haila

nd S

ecur

ities

Dep

osito

ry; V

SD =

Vie

tnam

Sec

uriti

es D

epos

itory

Sour

ce:

ABM

F SF

2.

KRX

JGBC

C

PDEx

PDEx

Sing

apor

eOT

C

12



2. Regulatory Vacuum in Private PlacementThe regulatory vacuum in private placement in some of the domestic markets can be seen as a place of future improvement of the securities laws to be put properly as a regulated and an exempted private placement market to be taken up in tandem with their development stages.

That sort of clearly stipulated private placement scheme will be an opportunity to propose a regional self-regulatory framework for qualified market participants in the future.

Table 2.2 Existence of Exempt Regimes

Jurisdiction Existence of Exempt Regimes

Exempt securities/Exempt transactions (Private Placement)People’s Republic of China

-

Hong Kong, China Yes.

Indonesia No. Private placement (to less than 100) is not regulated in Indonesia.

Japan Yes.

Republic of Korea The Qualified Institutional Buyer system (and professional only market) will be launched in May 2012 under the revised Financial Services Commission Regulation on Issuance, Public Disclosure, etc. of Securities.

Malaysia Yes.

Philippines Yes.

Singapore Yes.

Thailand Yes.

Viet Nam No. Private placement (to less than 100) or sale to professional investors is clearly stipulated in the amended Securities Law. However, private placement is not regulated as an exempted scheme.


3. Bondholder Representative and/or TrusteeThe concepts of bondholder representative, commissioned bank, and trustee are gaining popularity and are evolving. For example, the new Commercial Code in Republic of Korea, which will come into effect in 2012, is re-defining the role of commissioned banks.

Table 2.3 Status of Concepts of Commissioned Company, Bondholder Representative and Trustee

Jurisdiction Name of the systemStatus of Concepts

of Commissioned Company, Bondholder Representative and Trustee People’s Republic of China

Commissioned company • Enterprisebondshavethisconcept;whetheritworksisuntested.

Hong Kong, China Trustee • TheappointmentofatrusteeisdoneunderprovisionsoftheTrustIndenture.• Theappointmentofatrusteeisnotmandatory.• Norecentissuesorprogramsfeaturedtheconceptoftrustee.

Indonesia wali amanat (Trustee) • Bapepam-LKhasguidelinesforregistrationandthedutiesastrustee.• Trusteesmustmakeacontract,perwaliamanatan, with the corporate issuer in accordance with the

conditions set out by Bapepam-LK.

Japan Commissioned person or Commissioned company

• StipulatedinCompanies Act.• ItshallnotbeappliedincasebondminimumunitisJPY100millionormore.

13


Jurisdiction Name of the systemStatus of Concepts

of Commissioned Company, Bondholder Representative and Trustee Republic of Korea Commissioned company

(Revised Commercial Law which will take effect in 2012)/(Old Commercial Act)

• StipulatedintherevisedCommercial Act.• Theappointmentofacommissionedcompanyisnotmandatory.• TheappointmentofacommissionedcompanyisdoneunderprovisionsoftheTrustIndenture.

Malaysia Trustee • Trustdeedandtrusteeisrequired;basedonTrustee Corporation Act.• TrusteesshouldbeapprovedbytheSecuritiesCommission(SC)andlistedontheSCwebsite.• AAAissuersmaynotneedatrustee,butsuchissuesneedtobeapprovedbySC,anddefault

definitions need to be included in bond issue documentation.

Philippines Trustee - for Public offering.Facility Agent (FA) - for Private placement

• Publicofferingofbondissuestypicallyhasatrustee.• Corporatebondissuersmustappointatrustee.• PrivateplacementsrequireanFA,whichfunctionsasatrusteeandfiscalagent;intheabsenceof

specific regulations, issue documentation would indicate that the FA works on behalf of investors.

Singapore Trustee • AnissuermustappointasuitabletrusteetorepresenttheholdersofitsdebtsecuritieslistedontheExchange. However, a trustee is not required for a debt issue that is offered only to sophisticated or institutional investors and is traded in a minimum board lot size of SGD200,000 or its equivalent in foreign currencies following listing. (Refer to article 308 “Part IV Trustee and Trust Deed” of Chapter 3 (Debt Securities) of the Singapore Exchange Main Board Listing Rules for detailed information on the suitability of the trustee and the provisions to be included in the trust deed.)

Thailand Bondholder Representative or Trustee

• Notrusteeconceptforbonds;butbondholderrepresentative(BR).• BRhasfiduciaryduty,plusanydutyandliabilitysetoutinthetermsandconditions;both

appointment of BR and actual terms and conditions need to be registered with the Securities and Exchange Commission.

• IndentureagreementsinbondissuescanspecifyatrusteeorBR.Thetrusteeoverseesbondholderrights, including the filing of claims and demand payments from the issuer or guarantors. Bondholders can sue and claim for damages from the trustee in case the trustee acts in bad faith or causes damages to bondholders.

Viet Nam • InVietNam,thereisnoofficialconceptofthemeetingsofbondholdersyet.Source ADB Consultants, based on research materials and market visit information.

4. Common Law and Civil Law TraditionsAlthough market regulations in the region vary in many ways, this does not mean that harmonization is impossible. Markets can be categorized into different groups if regulations are viewed from certain angles. For instance, markets with common law tradition, such as Singapore, Malaysia and Hong Kong share the same trustee concept. Markets with civil law tradition like China, Indonesia, Japan, Republic of Korea, Thailand, and Viet Nam, while they may not have the concept of trustee, support the concept of an entity acting for bondholders; names, roles, fiduciary duties and type of institutions, though, may differ (i.e., bondholders representative or commissioned bank, etc.). Generally, if the details are examined, the differences may not be as significant.

Table 2.4 Legal Tradition

Jurisdiction Original Legal Tradition InfluencesPeople’s Republic of China Civil law or civil law system English law, United States (US) law, Japanese law

Hong Kong, China UK law, Common law

Indonesia Islamic law, Dutch law, Civil law or civil law system US law

Japan Civil law or civil law system English law, US law, European Union law

Republic of Korea Civil law or civil law system English law, US law, Japanese law

Malaysia English law, Common law, Islamic law

Philippines Spanish law US law



14


Jurisdiction Original Legal Tradition InfluencesSingapore English law, Common law (Australian law)

Thailand Civil law or civil law system English law, US law, Islamic law

Viet Nam Civil law or civil law system French lawSource: ADB Consultants, based on research materials and market visit information.

5. DifferentRequirementsforIdentifyingInvestorsandBeneficialOwnersRequirements for identifying investors and beneficial owners are different in several countries or jurisdictions. For instance, China does not allow omnibus accounts, even for International Central Securities Depositories (ICSD), while the Republic of Korea recently revised its regulation to allow omnibus accounts for ICSDs only. This, on the other hand, is allowed in Japan and in ASEAN markets. However, there is a growing tendency or desire among regional regulators to increase monitoring.

Table 2.5 Requirements for Identifying Investors and Beneficial Owners

Jurisdiction

Regulators’ Policy related to the Necessity of Disclosure of Ultimate

Beneficial OwnerDirect or indirect Account

Holding SystemPeople’s Republic of China Yes. Beneficial owner to be disclosed.

Hong Kong, China No policy Both

Indonesia No requirement by law.Typically grouped by tax rate or domicile.

Japan No policy Direct. (Account holders have the rights directly against issuers)

Republic of Korea No policy Direct

Malaysia No policy

Philippines No policy Registered holders have legal rights against the Issuer.

Singapore No policy Both

Thailand No policy Indirect

Viet Nam No policy IndirectSource: ADB Consultants, based on research materials and market visit information.

Table 2.6 Existence of Omnibus Accounts or Nominee Concept

Jurisdiction Existence of Omnibus Securities Account Existence of Nominee ConceptPeople’s Republic of China No. Securities must be kept in the name of the beneficial owner. No.

Hong Kong, China Yes. Yes.

Indonesia Yes. Yes.

Japan Yes. Yes.

Republic of Korea Yes. But, the foreign exchange regulation in Republic of Korea does not allow omnibus accounts for payments for foreign investors. To avoid this, foreign investors who use International Central Securities Depositories can use their status as Qualified Foreign Investor and are, thus, allowed to make use of omnibus accounts.

Yes.But it cannot be applied to Foreign Investment in Bonds.

(See details “Contents of Findings, XVII. Omnibus Securities Account/Nominee Concept”)

Malaysia Yes. Yes.

Philippines Yes. Yes.



15


Jurisdiction Existence of Omnibus Securities Account Existence of Nominee ConceptSingapore Yes. Yes.

Thailand Yes. Yes.

Viet Nam Yes. No.Source: ADB Consultants, based on research materials and market visit information.

6. Public Offering and Private PlacementTwo general approaches are observed in the markets when it comes to public offering:

(1) Full disclosure with specific exemptions and

(2) A clearly defined disclosure regime.

Markets are united in referring to public offerings as specified disclosure to all potential investors, whereas private placement or private offerings mean limited disclosure to only a specific investor group. However, a private offer does not mean no disclosure or no underlying regulations. In some markets, there exists a regulatory vacuum in private placement as mentioned previously. In the near future, a specific offering within professional market(s) could cover elements of both concepts of public and private offering.

Among the markets covered in the research, Hong Kong and Singapore are closer to international markets in terms of development; other ASEAN+3 markets are still developing.

Generally speaking, creating a common platform for issuance and investment of bonds among ASEAN+3 countries may not be that difficult since the necessary underlying concepts are already in place. This may also negate the discussion on whether to pursue onshore or offshore access to such a market.

Table 2.7 Existence of Exempt Regimes

JurisdictionExistence of Exempt Regimes

(Exempt Securities or Exempt Transactions in Private Placement)People’s Republic of China (PRC) “Self-regulatory Rules for Inter-bank Bond Market Non-financial Enterprise Debt Instrument on Private Placement”

provides for the process involved in private-placement instruments including issuance, registration, trading, and information disclosure, among others. Exempt regime is not applied in the PRC.

Hong Kong, China Yes.

Indonesia No. Private placement (to less than 100) is not regulated in Indonesia.

Japan Yes.

Republic of Korea Yes. The Qualified Institutional Buyer (QIB) system (and Professional only market) will be launched in May 2012 under the revised Financial Services Commission Regulation on Issuance, Public Disclosure, etc. of Securities. Korea Financial Investment Association regulation on management of the QIB system will be enacted before May 2012.

Malaysia Yes.

Philippines Yes.

Singapore Yes.

Thailand Yes.

Viet Nam No. Private placement (to less than 100) or sale to professional investors is stipulated in the amended Securities Law clearly. But private placement is not regulated as an exempted scheme.



16


7. DefinitionofProfessionalInvestorsDefining professional investors is critically important to the next phase of ASEAN+3 Bond Market Forum (ABMF) discussions, as described in section C. Currently, there are varying definitions of professional investors where they exist. For instance, Indonesia acknowledges the concept but does not define it by law. In the case of Japan, the concept is clearly defined in recent legislation to create the TOKYO PRO-Bond Market. Malaysia does not have a direct definition, but the Capital Markets and Services Act of 2007 (CMSA) contains relevant provisions on how excluded offerings of bonds could be made to institutional and high net worth investors. Thailand has specific definitions for institutional investors.

Table 2.8 Existence of the Concept of Professional Investor

Jurisdiction Existence of a clear Definition of Professional Investor Concept People’s Republic of China

• Noconceptordefinitionof‘professional’(investor)isevidentinChineselaw.ThePeople’s Bank of China is mulling over the concept of Qualified Institutional Buyer (QIB).

Hong Kong, China • Professionalinvestorisdefinedinsection1ofPart1ofSchedule1totheSecurities and Futures Ordinance, etc.

Indonesia • Indonesiadoesnothavespecificdefinitionsonthistypeofprofessionalinvestors.Bapepam-LK is working on a definition of Professional Investor. Private placement (to less than 100) is not regulated in Indonesia.

Japan • TheFinancial Instruments and Exchange Act stipulates a definition for Specified (Professional) Investor and Qualified Institutional Investor.

Republic of Korea • TheFinancial Investment Services and Capital Markets Act classifies a Professional Investor. But the Republic of Korea so far does not have an exempt regime for Professional Investors. The Republic of Korea will launch the QIB market, which is an exempt regime for Professional Investors in May 2012.

Malaysia • SophisticatedInvestorisnotexplicitlydefinedintheCapital Market and Services Act 2007 (CMSA). However, the CMSA exempts sophisticated or professional investors from prospectus requirements.

Philippines • Securities Regulation Code (SRC), SRC Rules, Over-the-Counter Rules and Qualified Buyer Rules clearly define Qualified Buyer, Qualified Individual Buyer and Qualified Institutional Buyer. SRC specifies sale to Qualified Buyers as transaction exempt from registration.

Singapore • UnderSecurities and Futures Act, Accredited Investor and Institutional Investor are defined. Exemptions to prospectus requirements include exemptions for offers that are made only to institutional investors and accredited investors, etc.

Thailand • “NotificationofSecuritiesandExchangeCommission(SEC)”definesInstitutionalInvestors and High Net Worth Investors. Private Placement of corporate bond offers to institutional investors will be exempted from obligation to file disclosure documents to SEC.

Viet Nam • TheSecurities Law defines Professional Securities Investor. The Amended Securities Law defines Non-public offering of securities (Private placement) (to less than 100, etc.).


17


Table 2.9 Existence of Professional Investor-Only Market

Jurisdiction Existence/Status Quo of the Professional Investors Only MarketPeople’s Republic of China

Does not exist. But the Inter-bank Bond Market consists of institutional participants only. The People’s Bank of China is considering the Qualified Institutional Buyer (QIB) concept.

Hong Kong, China The Hong Kong Exchanges and Clearing Limited has performed market consultation on some proposed changes to the requirements for the listing of debt issues to professional investors only in December 2010 and the Rule amendments were effected in November 2011.

Indonesia Does not exist.

Japan Exists. TOKYO PRO-BOND market with listing on the TOKYO AIM.

Korea The QIB market and trading system will be launched within 2012.

Malaysia TheSecuritiesCommissionandBankNegaraMalaysiaintroduced‘ExemptRegime.’

Philippines Exemptions are granted for particular securities and transactions.

Singapore Exists. There is a market for professionals which are exempted from prospectus requirements.

Thailand Private Placement is exempt from full filing requirement.

Viet Nam Does not exist. Source: ADB Consultants, based on research materials and market visit information.

8. Documentation LanguageWith regards to documentation language, there is a need to study this area in greater detail. Some jurisdictions have added other languages for documentation. One such case is in Hong Kong, China where Chinese is now an acceptable documentation language.

9. DefiningSelf-RegulatoryOrganizationsThe definitions of SROs may differ by market but their functions are comparable.

Table 2.10 Definitions of Self-Regulatory Organizations

Jurisdiction Name Main Functions People’s Republic of China

Inter-bank Bond Market (National Association of Financial Market Institutional Investors [NAFMII])In 2007, NAFMII was officially established.

NAFMII is mainly responsible for the self-regulatory management of the over-the-counter (OTC) market. The establishment of NAFMII fills in the void of a self-regulatory organization (SRO) in the OTC market, forming a market management mode that comprises both government supervision and market self-regulatory management. • Promoting investor protection mechanism. NAFMII is promoting the investor protection mechanism in

the non-financial enterprise debt capital market and formulated self-regulatory normative documents such as the “Rules for Meetings of Non-financial Enterprise Debt Holders in the Inter-bank Bond Market.”

1. Guiding and regulating market with the “Self-Governing Rules and Standardization of Management system of the Market.”

2. Further deregulation for issuance of bonds and notes in the inter-bank market.

Hong Kong, China -- No SROs in Hong Kong bond market.

Indonesia 1. The Indonesia Stock Exchange (IDX)

2. The Indonesian Central Counterparty 3. The Indonesian Central Securities Depository

---Each regulates its own areas of operations, subject to Bapepam-LK approval.

As one of the three SROs of the capital market licensed by Bapepam-LK, IDX:(1) facilitates and regulates the Exchange. Specifically, it discusses, prepares, acquires approval from

Bapepam-LK, issues, and changes Listing Regulations, Trading Regulations and Membership Regulations;

(2) develops a mechanism for organizing and monitoring the Exchange; (3) implements Good Corporate Governance practice based on IDX’s Corporate Governance Principles;

and (4) develops infrastructure and technologies projects with other SROs.

To produce professional human resources that can encourage capital market growth, together with other SROs, IDX formed the Association of Indonesian Capital Market Education (P3MI). In 2010, P3MI, in cooperation with University of Indonesia (UI), founded Indonesia Capital Market Institute (TICMI). TICMI is focusing on giving education and training skills to candidates aspiring to become underwriters, investment managers and broker/dealers.


18


Jurisdiction Name Main Functions Japan Japan Securities Dealers

Association (JSDA), Tokyo Stock Exchange Group (TSE), TOKYO AIM

JSDA is the full-fledged SRO for the securities industry in Japan. It issues a variety of rules and market practices/guidelines for bond market participants.

Rules: When JSDA members violate these rules, they are subject to disciplinary action by JSDA. JSDA takes into account market conditions and the practical reality of transactions in establishing, revising and abolishing rules for the purpose of achieving fair and smooth transactions in the Japanese market, thereby contributing to the protection of investors. During the rule-making procedure, a draft of rules is prepared first through deliberations mainly by JSDA members. The draft is then subjected to public comment and other processes, and finally approved by JSDA.

Guidelines: Guidelines are practical rules that JSDA requests participants in the bond market to comply with (thus recognized as “best practice”). As they are merely practices, those who do not comply are not penalized. However, as voluntary compliance with these guidelines by the overall market contributes to smooth and efficient transactions, most market participants observe the guidelines. Consequently, JSDA collects and considers the opinions of market participants when setting new guidelines or revising /abolishing old ones.

Standard Procedures, etc.: Besides the above, JSDA issues from time to time notices to members in advance regarding standard procedures, etc.

TSE’s role as a self-regulatory organization: It examines companies to assess their suitability as listed companies. It requires these companies to comply with disclosure requirements so that investors are able to make informed decisions, and it provides a market place for those companies’ securities to be traded. Pursuant to the Financial Instruments and Exchange Act (FIEA), TSE has self-regulatory functions to maintain a transparent, equitable and reliable market. The TSE has two units in relation to its self-regulatory function: (1) the Listing Regulation Unit deals with issues related to listing and (2) the Compliance Unit deals with issues related to trading participants.

Self-Regulation Punishment and Dealing with Offenders: TSE Regulation handles any trading participant that violates the law or stock exchange rules in accordance with article 34 of the official trading participant regulations. The “Disciplinary Committee” is an advisory body that, in addition to conducting inquiries, also handles penalty funds, censure, trading suspension, and limiting or canceling trading capabilities, etc.

TOKYO AIM’s Role as TOKYO PRO-BOND Market SRO: TOKYO PRO-BOND Market-related rules and regulations are provided by TOKYO AIM. TOKYO AIM is an SRO for the TOKYO PRO-BOND Market. Disclosure requirements under the FIEA such as Securities Registration Statements do not apply to the securities listed on the TOKYO PRO-BOND Market.

JSDA and TOKYO AIM: Trading on the OTC market is regulated under the JSDA’s Self-regulatory Rules and Guidelines for the Bond Market. “TOKYO AIM’s TOKYO PRO-BOND Market Listing Regulations and Enforcement Rules” and “JSDA’s Self-regulatory Rules and Guidelines for the Bond Market” have a mutually important and complimentary relationship.

Republic of Korea Korea Financial Investment Association (KOFIA),Korea Exchange (KRX)

KOFIA is an incorporated membership organization created to maintain business order between members, assuring fair trade, protecting investors, and promoting the sound development of financial investment services. Members of KOFIA are financial investment firms, general administration companies, collective investment scheme management companies, bond assessment companies and members under the conditions prescribed by the articles of KOFIA. KOFIA aims to promote fair business practices among member companies, create a fair business culture in the securities trading market, and maximize the function of investor protection. As such, KOFIA undertakes such activities as self-regulation to protect investors and maintain market order among member companies; dispute mediation between members regarding their business activities; registration and management of investment advisers and managers; management of OTC trading for non-listed stocks and non-listed and listed bonds; and establishment of dispute mediation rules for self-mediation of conflicts in the industry.

KRX aims to fix and stabilize fair prices in the transactions of securities and exchange-traded derivatives, and facilitate the stability and efficiency of other transactions. It established and operates the stock market, the KOSDAQ Market, and the derivative market. Under the Financial Investment Services and Capital Markets Act, the stock market is established for the trading of securities, such as debt securities, equity securities, beneficiary securities, investment contract securities, derivative-combined securities, and securities depositary receipts.



19


Jurisdiction Name Main Functions Malaysia Bursa Malaysia,

Financial Market Association of Malaysia (ACI Malaysia, quasi SRO)

Bursa Malaysia (Exchange): Securities Commission Malaysia (SC) is the primary regulator of the Exchange. The SC relies on Bursa Malaysia to perform extensive regulatory functions that extend beyond their market operations, including regulating members’ business conduct. Bursa Malaysia is also responsible for marketplace surveillance. Bursa Malaysia, on behalf of the SC, supervises and enforces disclosure standards for listed companies. It adopts a thematic approach to achieve the goals and objectives of ensuring effective market regulation. Under this approach, in discharging its regulatory role, Bursa Malaysia will focus on certain key themes. These themes are regularly reviewed to ensure relevance in a progressive environment. The six themes are as follows: (1) Enhancing standards of corporate governance among listed issuers, (2) Improving standards of disclosure, (3) Promoting high standards of business conduct and self-regulation among brokers, (4) Enhancing the effectiveness of enforcement, (5) Elevating the level of education and awareness in the industry, and (6) Managing crisis in light of the global financial turmoil.

Financial Market Association of Malaysia (ACI Malaysia): The Bond Dealers Association was established in June 1996 to represent the industry’s views and work with regulatory authorities to promote the bond market. On the other hand, ACI Malaysia was established in 1974 to monitor, develop and improve industry standards, and to bring them in line with international best practice. ACI Malaysia, whose membership comprises staff from treasury operations of Malaysia’s financial institutions (including insurance companies), has adopted a Code of Conduct for the industry. To qualify as a member of ACI Malaysia, a rigorous qualifying examination must be passed. ACI Malaysia qualifies as an SRO in its function and actions; however, ACI Malaysia has not yet been conferred official SRO credentials.

Philippines PDS Group (Philippine Dealing and Exchange [PDEx])

The Securities and Exchange Commission granted PDEx the license to act as an SRO for the Inter-Dealer, Inter-Professional and Public Markets. As an SRO, PDEx has adopted the PDEx Rules that governs all transactions dealt on the PDEx Trading Platform for fixed-income securities.

Singapore Singapore Exchange (SGX)

Being a listed exchange and frontline regulator, SGX is considered an SRO. SGX serves as an SRO for the markets and clearing houses that it operates in Singapore. It works closely with relevant regulatory authorities, including the Monetary Authority of Singapore and the Criminal Affairs Department, to develop and enforce rules and regulations to build an enduring marketplace. SGX bears commercial responsibilities in addition to its regulatory duties. While this dual role may present conflicts, SGX has established a framework to manage such conflicts.SGX undertakes various regulatory functions to promote a fair, orderly and transparent marketplace as well as a safe and efficient clearing system. These functions are handled by the following regulatory departments: (1) Issuer Regulation, (2) Catalyst Regulation, (3) Member Supervision, (4) Market Surveillance, (5) Enforcement, (6) Risk Management, (7) Clearing Risk, and (8) Regulatory Development and Policy.

Thailand Thai Bond Market Association (ThaiBMA), Exchanges

ThaiBMA is an SRO licensed to run an efficient market and act as an information center for the secondary bond market. It is responsible for developing the market, establishing market conventions and standards, and acting as a bond pricing agency. It also provides a forum for market professionals to move towards a more mature and sophisticated Thai bond market.The membership of ThaiBMA can be classified into three types, each of which is subject to different membership fees and requirements:

(1) Ordinary members are dealers. (2) Extraordinary members are inter-dealer brokers. (3) Associate membership is provided for a dealer that has monthly average trading value in the past one year

of less than THB100 million per month.

Roles and functions of Thai BMA as an SRO: ThaiBMA oversees and monitors the conduct of its members to ensure fairness and efficiency in debt securities trading. It is committed to retaining the confidence of its membership, regulators and investors. It performs market monitoring and surveillance to ensure that all trading activities comply with relevant laws and regulation, and act as the front line to detect any unfair trading




20


Jurisdiction Name Main Functions practices. It established the Ethics and Code of Conduct for members and traders. It also issues rules and guidelines regarding debt securities trading and good market practice. ThaiBMA is also responsible for bond trader examination and registration and provide them with ongoing education to enhance their professionalism. In addition, it determines enforcement procedures to penalize those who do not comply with the regulation. There is a Memorandum of Understanding (MOU) between the Securities and Exchange Commission and ThaiBMA regarding Bond Market Supervisory Cooperation.Exchanges are regarded as SRO in Thailand.

Viet Nam Vietnam Bond Market Association (VBMA)

In August 2008, the Ministry of Finance approved the list of the Preparation Committee for establishing the VBMA. On 22 May 2009, the Minister of Interior issued an official decision allowing the establishment of the VBMA.

VBMA is regarded as Viet Nam’s bond market SRO. VBMA is a non-profit organization aimed to promote the professional and effective development of the Viet Nam bond market, guarantee the legitimate rights and interests of members, and, at the same time, ensure national interests. VBMA’s roles and functions:(a) Standardize trading practices and market conventions for bonds and other debt instruments of similar

nature in the Vietnamese bond market; (b) Enhance regional and international integration of the bond market, in general, and of the members,

in particular, by encouraging the adoption of global best practices by market participants under the conditions of the Vietnamese bond market;

(c) Establish the code of conduct and ethics to govern the relationship of market participants to ensure the equality;

(d) Improve market expertise and skills by conducting activities to aggregate and analyze bond information, consulting, training and provision of facilitating services to members and other related participants in trading bonds and other debt instruments of similar nature in the Vietnamese bond market;

(e) Serve as a forum and bridge for exchanging and updating bond information, for strengthening collaboration and mutual understanding among its members and between its members and the Vietnamese regulatory authorities, as well as related international organizations; to make comments on related policies; to support the state competent bodies in improving policies and legal framework for the bond market in Viet Nam; and

(f) Update, aggregate, store and build a database on bond market information, thus helping increase transparency in the Vietnamese bond market.


10. Greater Use and Acceptance of Islamic Bond (or Sukuk) StructureA growing number of jurisdictions now allows or promotes the use of Islamic structure in the issuance of bonds in the region. In addition to Malaysia (which has the largest market), Indonesia, Thailand, Singapore and Hong Kong, Japan will also launch its regulatory framework for issuance of Islamic bonds or Sukuk in its bond market. In general, issuer’s obligations under a Sukuk issue and risk exposures of investors are not materially different from a conventional bond issue. If at all such material difference exists, it is usually well disclosed in the offering documents.

Table 2.11 Existence of the Islamic Finance Market

Jurisdiction Existence of the Islamic Finance MarketPeople’s Republic of China No


Indonesia Yes

Japan Yes

Republic of Korea No

Malaysia Yes

Philippines No

Singapore Yes

Thailand Yes

Viet Nam NoSource: ADB Consultants, based on research materials and market visit information.



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1. Improve Information AsymmetryThrough the ASEAN+3 Bond Market Forum (ABMF) Sub-Forum 1 (SF1) market guides and this comparative analysis, it is highly expected that the information asymmetry evident in many places will be improved with the intention to attract more attention from investors outside and within the region.

2. Establish an Asian Version of a Professional Bond MarketplaceIn the future, ASEAN+3 may consider establishing a common framework similar to the Eurobond market, possibly modeled on the experiences from the Eurobond market’s professionals. However, it is important to understand that the current version of European Union (EU) rules or the Eurobond market framework may not be directly applicable to Asia; hence, it may be necessary to establish an Asian version of such marketplace.

3. Key Objectives for the ASEAN+3 Bond Market Forum Phase 2Thus, the key objectives for ABMF Phase 2 will be to facilitate cross-border or intra-regional initiatives of issuance and investment of bonds.

4. The Preferred ApproachThe preferred approach might focus on a professional-markets or exempted-markets regime (including laws stipulating private placement), which waives full-disclosure requirements for ordinary public offerings to professional investors across jurisdictions. This might lead to the creation of an intra-regional professional marketplace populated only by qualified investors and issuers.

5. Key OutcomesThe ABMF SF1 Phase II key outcome would be an organized and well-documented Intra-regional Professional Market, evident through a bond issuance program with regional standardization of documentation. Such regionally standardized bond issuance program should lead to a regional medium-term note (MTN) program that will be committed to open up the markets to qualified issuers and investors in the region and beyond.

Implications for the Next Phase of the ASEAN+3 Bond Market Forum Sub-Forum 1 (2012–2013)

22


Figure 2.2 Regional Standardization of Documentation

Asian (ASEAN+3)(Multi-Currency)Bond Issuance(MTN) Program

Gradual approach

Standardized bond issuance program

ABMF SF1 MembersMarket Professional

Recommendation

Source: ADB Consultant.

IssuerIssuer

Issuer

IssuerIssuer

Issuer

6. Indispensable Conditions for Realizing an Inter-Regional Professional Bond Marketa. Understanding and recognition among regulators and policy makers. For this proposal to be accepted, it is important to achieve a common understanding and mutual recognition among regulatory authorities and/or policy makers in the region. Mutually recognizing the common denominators––the concept of professionals, exempted market conditions, and so on––will be important for the discussion.

Figure 2.3 Exempted Market versus Full Disclosure Market

Professionalmarket

QIB = Qualified Institutional BuyerSource: ADB Consultant.

Offshore Eurobond market Domestic market

Other Jurisdictions’ marketsQIB market

Exempted marketPrivate placement

market

Public offering market with general investors including retail sector

with full disclosure requirement

Safe harbor Fully regulated area

23


This concept would be similar to, but not completely congruent, with the present state of the US bond market, which is divided into market segments illustrated in Figure 2.4.

Figure 2.4 Comparative Structure of US Domestic and Offshore Markets

QIB = Qualified Institutional Buyer; SEC = Securities and Exchange CommissionSource: ADB Consultant.

Offshore market Domestic market

Regulations S,Off-shore Offering

(Offer for sale to U.S. residents is prohibited within primary selling-restriction period [40 days] in U.S. in principle)

Rule 144A,Private Placement

(“QIBs” [equivalent to a specified institutional investors in Japanese term] only, can be in resale between QIBs only)

Regulation D,Private Placement

(Accredited Investors [AIs] [equivalent to qualified institutional investors in Japanese term] only and prohibitions of resale, in principle)

Public Offering

(SEC registered offering)

b. Taking a gradual approach. In taking a gradual approach, SF1 will start with what can be done within the scope of current legislation and regulation in each jurisdiction, and without the intention to change the laws and regulations.

7. Expected Result of Mutual Recognition Approach or Convergence Approacha. Member markets or jurisdictions can define a common, general and multi-

facetted set of goals or objectives, which are non-binding, but recommended for all markets.

b. Jurisdictions would be able to make their own way towards these goals or objectives, i.e., a roadmap or defined path for each market would be required.

c. This would allow discussing individual subjects by themselves, together or in parallel, summarizing results in a future report easily.

8. Establishing an Integrated Intra-Regional Professional Bond MarketThe first emphasis should clearly be on efforts to allow cross-border transactions within the domestic bond markets, with a goal to arrive at a mutually recognized and accepted framework for these transactions. This envisages a development of the markets from their present, fragmented state (as shown in Figure 2.5) to a group of markets connecting and agreeing on the key elements of a future common market (as shown in Figure 2.6), to ultimately create a common market by combining all the elements in a common marketplace (as shown in Figure 2.7).

24


Figure 2.5 Status Quo of Asean+3 Bond Markets

Figure 2.6 Connecting the Professional Market Elements in the Region

ProPro

Pro

Pro

Pro


General Investors MarketIncluding Retail Sector

Professional Marketor QIB Market

Each Jurisdiction’s Bond Market

ProPro

Pro

Pro

Pro


25


Figure 2.7 Creation of an Intra-Regional Bond Market

ProPro


Asianintra-regionalprofessional

securities market

The intention is to create a common ‘safe harbor’ for market participants within the ASEAN+3 markets on the basis of the most beneficial regulations. It is, thus, possible to create an integrated intra-regional professional bond market!

With qualified issuers and investors currently restricted to access many domestic bond markets in the region, it should be possible to establish common rules with reasonable efforts.

9. Connecting Each MarketUnder the proposed mutual recognition approach, cross-border flows of “Professional Securities” in both primary and secondary markets have to be granted “mutual recognition between jurisdictions with the following exemptions (1–4).”

Mutual (A and B) recognition between jurisdictions:

(1) Selling restriction on Qualified Institutional Buyer (QIB) in jurisdiction A to invest in resident A issuers’ securities issued in ‘mutually recognized professional securities market’ in jurisdiction B to be exempt.

(2) Selling restriction on QIB in jurisdiction A to invest in resident B issuers’ securities issued in ‘mutually recognized professional securities market’ in jurisdiction B to be exempt.

(3) Selling restriction on QIB in jurisdiction A to invest in resident C (other jurisdiction in the region) issuers’ securities issued in ‘mutually recognized professional securities market’ in jurisdiction B to be exempt.

(4) Resale (secondary market transactions) of the bonds between professional markets in jurisdiction A and B shall not be restricted.

Asianintra-regionalprofessional

securities market

26


Figure 2.8 Mutual Recognition Examples (1), (2), (3)


B country/jurisdictiondomestic market

A country/jurisdictiondomestic market

ASEAN+3 region

(1)Resident C Issuer (2)

Resident C Issuer (3)

Resident C Issuer

Resident A QIB

selling

‘mutuallyrecognizedprofessionalsecuritiesmarket’


10. Envisaged Area of Discussion in ABMF Phase IIWith a view on the findings summarized above and the projected development of the ASEAN+3 bond markets, it is envisaged to begin discussions on the following subjects in ABMF Phase II.

(a) Laws and regulations and Self-Regulatory Organization (SRO) rules in each jurisdiction.

(i) Recognize common denominator of the concept of professional investor, sophisticated investor, accredited investor, and QIB, among others;

(ii) Mutually recognize exempted market conditions, including private placement;

(iii) Standardize level of information disclosure and/or disclosure rules; (iv) Investor protection needs and existing regulations; (v) Participants and participants’ code of conduct; and (vi) Types of securities suitable (for future market).

(b) Market practices and functions of each domestic SRO

(i) Standardize related documentation in offering circulars, etc.; (ii) Standardize new issue underwriting procedures; (iii) Standardize rules and practices for secondary market making; and (iv) Synchronize the concept of eligible issuers.

11. Success Factors of a Mutually Recognized Professional MarketThe success of a mutually recognized professional market in the region rests on:

(i) The degree of maturity of each national securities legislation or law to be applied for investor protection;

(ii) Established condition of fair price formation in the capital market; (iii) Situation of the fixing of the code of conduct among market participants; and

27


(iv) The proper functioning of each domestic SRO.

Each jurisdiction will be expected to set its own objectives based on its market condition.

12. Discussion about Self-Regulatory OrganizationsA general discussion about a regional SRO in ABMF SF1 is not necessary for the time being, since it is not an indispensable factor for the design of new markets. The realization of a common SRO for ASEAN+3, in the spirit of the International Capital Market Association (ICMA) is, however, a future possibility.

SRO-related discussions are always limited to a single market under one single jurisdiction, complimenting a particular regulator. This is reflected in the International Organization of Securities Commission definition of an SRO. In other words, an SRO only functions as a domestic organization in a country or jurisdiction, being either a domestic governmental body, an exchange or a domestic industrial organization, and performing extensive regulatory functions. Therefore, the SRO function will typically not go beyond “domestic on-shore.”

Unless a country or jurisdiction qualifies as “good securities law for investor protection,” “certain level of governance provided by SROs, etc.,” and “good business conducts in the domestic market”, other countries or jurisdictions may hesitate to do “mutual recognition” of connecting their domestic professional markets.

13. ConclusionIt is envisaged that the work of ABMF Phase II in 2012 and 2013 will focus on research and discussions about the levels and qualities of certain key market elements, such as disclosure, professional investors and issuers, underwriters and broker-dealers with the objective to connect the domestic professional securities market between countries or jurisdictions.


29

Details of SF1 Contents of Findings

30


I. Legal Tradition in the Domestic Capital Markets

Table 1. Legal Tradition in the Domestic Capital Markets

Jurisdiction Original Legal Tradition InfluencesPeople’s Republic of China

Civil law or civil law system English law, United States (US) law, Japanese law

Hong Kong, China English law, Common law

Indonesia Islamic law, Dutch law, Civil law or civil law system

US law

Japan Civil law or civil law system English law, US law, European Union (EU) law

Republic of Korea Civil law or civil law system English law, US law, Japanese law

Malaysia English, Common law Islamic law

Philippines Spanish law US law

Singapore English law, Common law (Australian law)

Thailand Civil law or civil law system English law, US law, Islamic law

Viet Nam Civil law or civil law system French lawSource: ADB Consultants, based on research materials and market visit information

II. Governing Law for Domestic Bond Issuance

Table 2. Governing Law for Domestic Bond Issuance

Jurisdiction

Governing Law for the Resident Issuer

Governing Law for the Non-Resident Issuer• Non-Resident Issuance of Domestic Bond/Medium-Term Note

Laws and Regulations Related to the Bond MarketPeople’s Republic of China

Chinese Law Chinese Law• Between2009and2010,thebanhasbeenliftedonrenminbi-denominatedbondsissuedby

foreign non-banks and local subsidiaries of foreign banks in China. • On6April2010,theStateCouncildistributed“commentsontheappropriateworktoattract

foreign capital” and new policies has been laid out; to select foreign capital related to industrial policies, to attract foreign investment in the Midwest region, and to transfer the authority to attract foreign capital to local governments.

Among them, supports have been put forward such as initial public offering and listing by foreign companies, and it is explicitly stated that the scope of foreign companies to issue renminbi-denominated bonds in the domestic market will be gradually expanded.

1. Major Provisions on Administration of Issuing Treasury Bondsa. Regulations of Treasury bonds of the People’s Bank of China (Decree of the State Council [1992] No. 95), b. Measures for the Examination and Approval of the Qualifications for the Members of the Government Bond Underwriting Syndicates

(Order 39 of Ministry of Finance of the People’s Republic of China, the People’s Bank of China, and China Securities Regulatory Commission), and

c. Circular on Printing and Distributing the Rules for the Issuance of Book-Entry Treasury Bonds by Tender in 2011 (CK [2011] No.4), etc.

2. Major Provisions on Administration of Issuing Financial Bondsa. Provisions Governing the Issuance of Financial Bonds in the National Inter-bank Bond Market (Order [2005] No. 1 of the People’s

Bank of China), b. Administrative Procedures for the Administration on Issuance of Financial Bonds in the National Inter-bank Bond Market

(Announcement [2009] No. 6 of the People’s Bank of China),


31


Jurisdiction



Laws and Regulations Related to the Bond Marketc. Measures for the Administration on Issuance of Subordinated Bonds by Commercial Bank (Announcement [2004] No.4 of the

People’s Bank of China and China Banking Regulatory Commission), d. Announcement on Relevant Matters Concerning the Issuance of Hybrid Capital Bonds by Commercial Bank (Announcement [2006]

No.11 of the People’s Bank of China), e. Interim Measures for the Administration on Issuance of Renminbi Bonds by International Development Institution (Announcement

[2010] No.10 of the People’s Bank of China, Ministry of Finance, National Development and Reform Commission, and China Securities Regulatory Commission), and

f. Interim Measures for the Administration of the Issuance of Renminbi Bonds in Hong Kong SAR by Financial Institutions Within the Territory of China (Announcement [2007] No.12 of the People’s Bank of China and National Development and Reform Commission).

3. Major Provisions on Administration of Issuing Commercial Paper (CP), Super Short-Term CP (SCP) and Medium-Term Notes (MTNs)

a. Measures for the Administration of Debt Financing Instruments of Non-Financial Enterprises in the Inter-bank Bond Market (Order [2008] No. 1 of the People’s Bank of China) and

b. Auxiliary self-regulatory rules formulated by the National Association of Financial Market Institutional Investors.

Difference in CP may lie in the purpose of the capital raising: project finance (CP) or working capital (SCP).

4. Major Provisions on Administration of Issuing Listed Corporate Bonds a. Pilot Rules on the Issuance of Corporate Bonds (Order 49 of China Securities Regulatory Commission) and b. Relevant rules issued by the stock exchanges.

5. Major Provisions on Administration of Issuing Enterprise Bonds a. Regulations on Administration of Enterprise Bonds, Circular of National Development and Reform Commission on Promoting the

Development of Enterprise Bonds Market and Simplifying the Matters Relating to the Approval for Insurance (FGCJ Document [2008] No.7) and

b. Interim Measures for the Administration of Central Enterprise Bonds.

Hong Kong, China

Laws of Hong Kong Laws of Hong Kong • IssuersofbondstobelistedontheHKSEshouldalsoobservetheTradingRules

promulgated by the HKEx• ForbondstobelistedontheHKSE,issuersshouldalsoobservetherequirementsofthe

Listing Rules, as well as Parts II and XII of the CO, including section 44B

Specific laws governing different types of bonds are summarized as follows:1. Government bonds: The issuance of Government bonds is governed by the Loans Ordinance (Chapter 61 of the Laws of Hong Kong). On 8 July 2009,

the Legislative Council passed a resolution under section 3 of the Loans Ordinance authorizing the Government to borrow up to a maximum principal amount outstanding at any time of HKD100 billion or equivalent under the Government Bond Program.

2. Exchange Fund Notes issued by the Hong Kong Monetary Authority (HKMA) Exchange Fund Notes are issued under the Exchange Funds Ordinance (Chapter 66 of the Laws of Hong Kong).

3. Bonds issued by other statutory bodies and government-related corporations Issuance of bonds is governed by the respective ordinances governing the statutory bodies and/or Companies Ordinance, where

applicable. For instance, bonds issued by the Airport Authority, which is a statutory body established under the Airport Authority Ordinance (Chapter 483 of the Laws of Hong Kong), are governed by the same ordinance.

4. Bonds issued by private entities The issuance of bonds by private entities is governed by sections 41, 44A, 44B and 48A of the CO (Chapter 32 of the Laws of Hong

Kong), in addition to the SFO. The terms and conditions of the offers are set out in the offer documents, such as the prospectus. In addition to these, an offer cannot be in breach of other Hong Kong law. For details, refer to the Hong Kong Legal Information Institute (HKLII) website.

If the bonds are to be listed on the HKSE, in addition to the CO, issuers have to observe the Listing Rules as mentioned above and

other relevant rules promulgated by the HKSE.

If participants use the clearing, settlement and custody services provided by the CMU, the debt securities settlement system operated by the HKMA, they should observe the relevant rules promulgated by the HKMA.

Table 2. continuation


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Jurisdiction



Laws and Regulations Related to the Bond MarketIndonesia Indonesian law Indonesian law

• MTNprograms:Indonesianregulatoryframeworkdoesnotspecificallyaddresstheregistration of MTN, but it regulates the registration procedures for bonds and Sukuk. In order to facilitate the issuance of MTN which allows a firm to issue a series of bonds within a particular period with only one registration statement submission, Bapepam-LK released a new regulation on shelf-registration.

Under the current regulatory arrangement, if a bond issuance by non-residents is publicly offered, it must follow similar procedures to the issuance by domestic firms, without any exception. It hinders foreign issuers, especially the requirements on domestic supporting professionals.

Bonds issued by an Indonesian company or the Government of Indonesia offers in Indonesia through public offering and listed on the Indonesia Stock Exchange shall be governed by the laws of the Republic of Indonesia.

Regulation on shelf-registration:There is a rule related to Sustainable Public Offering (Shelf Registration) based on Peraturan Bapepam dan LK Nomor IX.A.15: Penawaran Umum Berkelanjutan, which allows the debit security or bond (efek bersifat utang, EBU) issued to the public in several stages. An issuer has to submit a Registration Statement of Sustainable Public Offering: (1) In accordance with Peraturan Bapepam dan LK Nomor IX.A.1, IX.A.2, IX.C.1, IX.C.2 and other related regulations. (2) Equipped with a statement from the issuer or public company and accountant, which states that the referred issuer or public company

never experienced failure to pay for a certain period.

Moreover, issuers also have to submit reports and information as follows: (1) Report of Sustainable Public Offering result to Bapepam-LK at least 5 working days following the date of allotment. (2) Information of reasons for not achieving the target funds (if target acquisition funds are not met). (3) Additional information and supporting documents when issuer is going to issue second and subsequent stages, at least 2 days since

the announcement of additional information.

Japan Japanese Law Japanese Law • LocalMTNprograms:Shelf-Registration:Yes.Japanese Law• Samurai-bondUK (English) law, US (New York [NY]) law, etc.• InternationalMTNprograms:Yes.

1. The Companies Act defines corporate bonds.2. In cases where a company will issue bonds in Japan, generally speaking, the company must specify a commissioned company or

person for bondholders and entrust the receipt of payments, the preservation of rights of claim on behalf of the bondholders and other administration of the bonds to that manager; provided, however, that this shall not apply in cases where the amount of each bond is JPY100 million or more as prescribed by the Companies Act, and other cases prescribed by the applicable Ordinance of the Ministry of Justice as cases where it is unlikely that the protection of bondholders will be compromised.

3. In the Japanese bond market, the Financial Instruments and Exchange Act (FIEA) distinguishes between a public offering (PO) and a private placement (PP) of securities very clearly, irrespective of whether they are domestic or foreign.

4. In 2008, the Financial Services Agency of Japan revised the FIEA as part of its plan to enhance the competitiveness of Japan’s financial and capital markets, establishing the legal framework for markets oriented towards professional investors (an offering system for Specified Investors and Specified Financial Instruments Markets stipulated in the FIEA). This provides the legal framework for the establishment of a new securities market, which is different from the general public offering system and has a wider range of investors than the US Rule 144A market. That is the TOKYO PRO-BOND Market.

Republic of Korea Korean Law Korean Law

The “Regulation on Securities Issuance and Disclosure” (RSID), enacted in February 2009, is a Financial Services Commission (FSC) regulation that overhauled the former “Regulation on the Issuance and Disclosure of the Securities” by adding regulatory improvements and additional authorities entrusted by the Financial Investment and Capital Markets Act. To ensure the fairness of securities issuance and investor protection, RSID specifically defines items which investors should be notified of in the form of descriptions on the registration statement and investment prospectus, along with the forms and other documents they should accompany. In particular, when it comes to the registration statements of collective investment securities and asset-backed securities, and the registration statement on mergers, business transfers and split-offs, split-and-mergers, comprehensive exchanges or transfer of stocks, RSID defines different specifics and required documents.



33


Jurisdiction



Laws and Regulations Related to the Bond MarketMalaysia Malaysian law Malaysian law, (UK (English) law, US (NY) law)

• LocalMTNprograms:Yes. Transparent requirements have been clearly set out in the guidelines issued by the Securities

Commission (SC) Malaysia.• InternationalMTNprograms:Yes. Full issuing market access on use of international MTN programs is allowed for issuers rated

BBB (international rating scale) and above. Transparent requirements have been clearly set out by Bank Negara Malaysia (BNM) and the

SC, and such information is made available in the public domain.

Specific laws governing different types of bonds are summarized as follows:1. Government bonds The Malaysian “Code of Conduct for Principals and Brokers in the Wholesale Money and Foreign Exchange Markets,” issued by BNM,

sets out best market practices, principles and standards to be observed in the Malaysian market. The objective is to uphold market integrity and promote the highest level of professionalism.

In addition, BNM also issues rules and guidelines governing the issuance, allotment, interest payment, redemption and settlement of scripless securities under the Fully Automated System for Issuing/Tendering and the Real-Time Electronic Transfer of Funds and Securities System.

The aim of these guidelines is to provide a uniform set of rules to promote operational efficiency, market integrity and market transparency.

2. Corporate Bonds - Regulation of the Corporate Debt Securities and Sukuk Market The Capital Markets and Services Act 2007, which is administered by the SC, governs all of the corporate bond and Sukuk market.

The SC also issues guidelines on the issuance of corporate debt securities and corporate Sukuk, supervises trading activities in the secondary market, and conducts joint examinations and inspections of investment banks together with BNM.

Philippines Philippine law Philippine law, (UK (English) law, US (NY) law)• LocalMTNprograms:Yes.• InternationalMTNprograms:Yes.Non-discriminatory basis, no restrictions for both resident and non-resident issuers.

The issuance of bonds in the Philippines is governed by the Securities Regulation Code (SRC), the implementation of which is under the Securities and Exchange Commission (SEC).

All publicly-offered securities must be registered with the SEC. Exemptions are granted, among others, for securities issued by the government, Bangko Sentral ng Pilipinas (BSP), local government units, banks except their own shares and any foreign government that has diplomatic relations with the Philippines. Exemptions are also granted for securities issued only to primary institutional lenders or qualified buyers as defined in the SRC sections 9 and 10, and the SRC Implementing Rules and Regulations. A credit rating is required to issue corporate bonds and commercial paper.

Foreign-denominated debt instruments must be registered with BSP.Government Securities: Several statutes or laws govern bond issuance for the Philippine National Government.

Singapore Singapore law Singapore law, UK (English) law, US (NY) law• LocalMTNprograms:Yes.• InternationalMTNprograms:Yes.Restrictions on issuance by non-residents: No. But, Requirements for debentures issuance program set out in Securities and Futures Act (FSA) section 240A. Several Acts of Parliament provide the legal framework for the Singapore securities market:1. Companies Act (Cap 50)All companies in Singapore are governed by the Singapore Companies Act (Cap 50 of the 1994 Revised Edition of the Singapore Statutes). The act (i) provides for the formation (and ultimately termination) of companies; (ii) confers on companies some special features; regulates the relationships between participants in companies and facilitates dealings between companies and outsiders. The Companies Act regulates the ability to issue, and form of, shares and bonds.



34


Jurisdiction



Laws and Regulations Related to the Bond Market2. SFA 2001 (Cap 289)The SFA (A42/2001) was first passed by Parliament on 5 October 2001. Since then, it has been coming into force in parts. Part I (Preliminary), Part VIII (Securities Industry Council and Take-over Offers), Part IX (Supervision and Investigation), Part X (Assistance to Foreign Regulatory Authorities), and Part XV (Miscellaneous, except sections 314 and 342[1] and [3]) came into effect on 1 January 2002. The Monetary Authority of Singapore (MAS) announced on 23 May 2002 that Part XIII of the SFA would come into force on 1 July 2002. Part XIII of the SFA deals with offers of shares, debentures and collective investment schemes. In tandem with the announcement of the enforcement date of Part XIII of the SFA, the MAS has also issued new regulations to supplement Part XIII, of which the main regulations are:i. the Securities and Futures (Offers of Investments) (Shares and Debentures) Regulations 2002 (Shares and Debentures Regulations); andii. the Securities and Futures (Offers of Investments) (Collective Investment Schemes) Regulations 2002 (Collective Investment Schemes Regulations). These regulations also came into force on 1 July 2002.

Thailand Thai law Thai law• LocalMTNprograms:Yes.Shelffiling.• InternationalMTNprograms:No.MOFisconsideringthisissue.Applyingtheinternational

MTN program may work against the Ministry of Finance’s (MOF) objectives of balancing the financial system. Furthermore, in instances where domestic liquidity is tight, it may raise the cost of raising funds in the domestic market.

• Restrictionsonissuancebynon-residents: Thailand has opened up the domestic market for non-resident Issuers; however, approval

remains subject to MOF and Bank of Thailand’s (BOT) consideration (use of proceeds, credit rating, and overall financial system liquidity). The Thai Securities and Exchange Commission (SEC) has adopted the ASEAN standard, which means a Singaporean firm may submit the filing document used in Singapore to the Thai SEC, for bond issuance in Thailand.

Governing Laws of Bond issuance, Self-Governing Rules, Related Legal and Regulatory issues behind the Market:- SEC Act B.E.2535 and its regulations - BOT Act B.E.2485 - Ministry of Finance – Public Debt Management OfficeAs stated above, SEC Act and SEC notifications govern the issuance of corporate bonds. Government bonds and state-enterprise bonds are issued under the Public Debt Management Act. BOT bonds are issued under BOT regulations.

Viet Nam Vietnamese law (Securities Law, Enterprise Law, etc.)

Vietnamese law• LocalMTNprograms:No.• InternationalMTNprograms:No.• Restrictionsonissuancebynon-residents:Yes.

Regulations related to government bonds/corporate bonds: 1. Government bonds: a. Circular No. 29/2004/TT-BTC dated 6 April 2004 provides guidelines on the issuance, underwriting and issuance agency for

government bonds, government-guaranteed bonds and municipal bonds.b. Circular No. 21/2004/TT-BTC issued by the Ministry of Finance (MOF) provides guidelines on tenders of government bonds,

government-guaranteed bonds and municipal bonds via the centralized securities trading market.c. Circular 75-2004-TT-BTC dated 23 July 2004 provides guidelines for issuance of bonds to the public.d. Circular No. 132/2010/TT-BTC, dated 7 September 2010 and issued by MOF, provides guidelines for amendment and supplement

to Decision N. 46/2006/QD-BTC.e. Decree 01/2011/ND-CP regulates the issuance of government bonds, government-guaranteed bonds and municipal bonds. It took

effect on 20 February 2011, and is expected to boost the development of Viet Nam’s bond market.f. Regulation No. 46/2008/QD-BTC dated 1 July 2008 and issued by the MOF to provide rules for government bond trading

management at the Hanoi Securities Trading Center (HaSTC, former name of HNX).g. Circular No. 19/2004/TT-BTC dated 18 March 2004 and issued by the MOF to provide guidelines for T-bill and foreign currency bond

auctions via the State Bank of Vietnam (SBV).h. Regulation No. 935/2004/QD-NHNN dated 23 July 2004 and issued by the SBV to provide guidelines for T-bill and foreign currency

bonds auctions via SBV.

Decree 01, which was released to replace Decree 141, will be the legal basis for standardizing activities in the primary government bond market. Generally speaking, Decree 01 contains new measures on the formation of a professional and effective bond market in accordance with standard international practices. This new decree makes important changes such as linking government bonds issuance



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Jurisdiction



Laws and Regulations Related to the Bond Marketactivity with public debt management under the new Law on Public Debt Management, effective 2011. The decree also unifies both foreign and local government bond issuance in a single decree instead of two decrees as previously, namely the Decree 141 and Decree 53/2009/ND-CP regarding the issuance of international bonds. In addition, the decree allows government bond issuance to be used to restructure debts and debt portfolios, as well as allowing bond swapping and buying back of bonds before the due date. This is an important step as it paves the way to restructuring the currently small and fragmented bond market. Another positive aspect of the Decree 01 is that it requires the MOF to gradually set up a market-maker system to raise bond market liquidity. Membership conditions have been prescribed by the MOF and are outlined in the decree. Participants in bidding and bond underwriting practices specified in the decree will be considered and recognized as system members provided they satisfy these conditions. The new decree provides clearer and stricter regulations regarding bond issuance and buying, and this will allow for more effective control of capital usage for government bonds. While Decree 141 restricted the use of capital from bond issuance to offset the budget deficit in the annual estimation approved by the National Assembly, Decree 01 allows government bond issuance not only to compensate the temporary deficit budget and to be used as budget expenditure for developing investment, but also to restructure government debts by lending to other organizations, as well as to ensure national financial security. As such, it will help issuers to use the government bond capital more flexibly and effectively and create conditions favorable to maintain continuous and regular issuance to help develop the market.

2. Corporate bonds: a. Securities Law 2006 No. 70/2006/QH11 is the highest regulatory document governing the listed and public corporate bond

issuance and trading. This law stipulates that an issuer wishing to make a public offering of bond must prepare certain documents and follow disclosure requirements, prior to a formal approval by the State Securities Commission. It stipulates the issuer’s responsibilities to maintain healthy financial conditions and to meet its financial obligations to bondholders. This law clearly mentions disclosure rules and practices for issuers.

b. Enterprise Law 2005 No. 60/2005/QH11 paves the path for debt issuance for a shareholding firm by stating that they have rights to issue corporate bonds, convertible bonds and other types of bonds. The law prohibits enterprises from issuing bonds when they do not exhibit a sound financial position, having signals of either low debt servicing capability or below-average profitability. For example, a company is not allowed to issue bonds if:

a) It fails to make full repayment for the principal and interest of issued bonds or did not pay or make full payment of due debts in the last 3 consecutive years;

b) The average after-tax-profit rate in the last 3 consecutive years is not higher than the interest proposed to pay for bonds to be issued.

c. Law amending and supplementing a number of articles of Securities Law No. 62/2010/QH12 dated 24 November 2010; d. Circular No. 17/2007/TT-BTC dated 13 March 2007 detailing initial offering (corporate bond included); e. Decision 07/2008/QD-NHNN by the State Bank of Viet Nam governs particular credit institutions operating in Viet Nam, including

state-run and joint-stock commercial banks, foreign bank branches, and 100% foreign-owned and joint-venture banks.f. Decree 90/2011/ND-CP dated 14 October 2011 and issued by the government to regulate the issuance of corporate bonds;

Decree 90 replaced.g. Decree 52/2006/ND-CP dated 19 May 2006 regulating the issuance of corporate bonds, and replaced the concept of the

issuance of corporate bond to the international market which was stipulated in Decree 53/2009/ND-CP regulating the issuance of international bonds.


III. Competent Authority (Regulator) and Self-Regulatory Organizations of Domestic Bond Markets

Table 3. Competent Authority (Regulator) and Self-Regulatory Organizations of Domestic Bond Markets

Jurisdiction Main Market Authority Related Market AuthoritiesSelf-Regulatory Organizations


• Inter-bank Bond Market (OTC): People’s Bank of China (PBOC)

• Exchange Market (Shanghai Stock Exchange and Shenzhen Stock Exchange): China Securities Regulatory Commission (CSRC)

• Foreign Currency Policy: PBOC, State Administration of Foreign Exchange

• Treasury Bonds: The State Council, Ministry of Finance, PBOC

• Financial Bonds: PBOC, China Banking Regulatory Commission

• Commercial paper (CP), short-term CP and medium-term notes: PBOC

• Listed Corporate Bonds: CSRC• Enterprise Bonds, State-Owned Enterprise Bonds:

National Development and Reform Commission

National Association of Financial Market Institutional Investors



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Jurisdiction Main Market Authority Related Market AuthoritiesSelf-Regulatory Organizations

Hong Kong, China

Hong Kong Monetary Authority Securities and Futures Commission --

Indonesia Capital Market and Non-Bank Financial Service Supervisory Agency

Bank Indonesia Indonesia Stock Exchange, Indonesia Clearing and Guarantee Corporation, Indonesian Central Securities Depository

Japan Financial Services Agency Tokyo Stock Exchange, TOKYO AIM, Japan Securities Dealers Association

Republic of Korea Financial Services Commission, Financial Supervisory Service

Bank of Korea Korea Exchange, Korea Financial Investment Association

Malaysia Securities Commission Malaysia Bank Negara Malaysia Bursa Malaysia, ACI Malaysia

Philippines Securities and Exchange Commission Bangko Sentral ng Pilipinas Philippine Dealing and Exchange

Singapore Monetary Authority of Singapore Singapore Exchange

Thailand Ministry of Finance, Securities and Exchange Commission

Bank of Thailand Thai Bond Market Association

Viet Nam State Securities Commission State Bank of Vietnam Vietnam Bond Market Association


IV. Role of the Self-Regulatory Organizations in Domestic Bond Markets

Table 4. Role of Self-Regulatory Organizations in Domestic Bond Markets

JurisdictionSelf-Regulatory

Organizations (SROs) Role of the SROsPeople’s Republic of China National Association

of Financial Market Institutional Investors (Inter-bank Bond Market)

• Self-Governing Rules and Standardization of Management of the MarketIn 2007, the NAFMII was officially established. NAFMII is mainly responsible for the self-regulatory management of the over-the-counter (OTC) market (Inter-bank Bond Market). The practice in most recent years proves that NAFMII plays an important role in facilitating market expansion, in guiding and regulating the primary market and the secondary market. 1. Self-regulatory Management System for the Secondary MarketThe self-regulatory management system for the secondary market was formulated, which standardized trading activities in the OTC market. a. Risk Management of Financial Derivatives TransactionsTo promote innovations and standardized development of bond derivatives, “the Guidelines on Internal Risk Management of Financial Derivatives Transactions in the Inter-bank Bond Market,” and “Guidelines on Credit Risk Mitigation Tools Pilot Business Projects” were promulgated in this regard. “The Master Agreement on Trading Financial Derivative Instruments in the Inter-bank Market of China” by NAFMII (also known as NAFMII Master Agreement) was published and popularized, which addressed a unified and standard text for the OTC financial derivatives market in China.

b. Working Guidelines for Market Makers and Code of Conduct for TradingA set of self-regulatory normative documents like “Working Guidelines for Market Makers of the Inter-bank Bond Market,” “Self-Regulatory Rules and Code of Conduct for Personnel relating to Trading”

Table 3 continuation


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Organizations (SROs) Role of the SROswere formulated to strengthen self-regulatory management of bond trading behavior of member institutions, regulate the behavior of related traders, maintain the legitimate competitive order of the market, and promote the sound and standardized development of the market.2. Non-Financial Enterprises Instruments Market ManagementDebt financing instruments of non-financial enterprises saw a rapid expansion and market management has become increasingly standardized. In 2010, debt financing instruments of non-financial enterprises registered and issued in local currency reached RMB1.3 trillion, accounting for 76% of the total amount raised by non-financial enterprise through the bond market during the whole year, according to NAFMII. A series of rules and guidelines regarding issuance and underwriting, information disclosure, credit rating, and market transaction of debt financing instrument were established in succession. Subsequently, full-process supervision and inspection, subsequent management and emergency management, and emergency response mechanism for registration and issuance were correspondingly established and improved. Risk inspection and pressure tests on issued debt financing instruments were regularly conducted, as well as dynamic monitoring on subsequent information disclosure and implementation of commitments after bond issuance. Site inspections to the issuer were also carried out in different levels to prevent market risk substantially.

• Promoting Investors Protection MechanismNAFMII is vigorously promoting an investors protection mechanism in the non-financial enterprise debt capital market and formulated self-regulatory normative documents such as “Rules for Meetings of Non-financial Enterprise Debt Holders in the Inter-bank Bond Market.” Up until now, the Inter-bank Bond Market has already established a primitive bondholder rights protection system. In 2010, NAFMII formulated the “Rules for the Meetings of the Holders of Debt Financing Instruments of Non-financial Enterprises in the Inter-bank Bond Market,” stipulating that when the issuer (1) fails to pay in full amount of principal or interest, (2) transfers all or part of the repayment obligation, (3) changes the credit enhancing arrangement or credit enhancement agencies, or (4) undertakes capital reduction, merger, division, dissolution, bankruptcy or receivership and other significant cases, a bond holders’ meeting may be convened to protect the legitimate rights and interests of bondholders.

• Further Deregulation for Issuance of Bonds and Notes in the Inter-bank Bond Market

Simplified Qualification of IssuersThe qualification of issuers is simplified and the interest can be flexibly determined between issuers and underwriters. The NAFMII enacts market rules on the issuance procedure for short-term financing bill (CP) and the Chinese MTNs, as well as general rules for registration, prospectus and disclosure in the Inter-bank Bond Market based on the Securities Law. In particular, the enactment of the general rule realizes the standardization of bond issuance in the Inter-bank Bond Market and consequently contributes to improving the process of bonds issuance.

Hong Kong, China – There are no SROs in the Hong Kong bond market.

Indonesia Indonesia Stock Exchange (IDX), Indonesia Clearing and Guarantee Corporation (KPEI), Indonesian Central Securities Depository (KSEI)

Each regulates its own areas of operations, subject to Bapepam-LK approval. A number of market associations exist, but none has an SRO status.1. IDXIDX was formed as a result of the merger between the Jakarta Stock Exchange and Surabaya Stock Exchange on 30 November 2007. IDX is regulated by the Bapepam-LK and the Ministry of Finance. All stock exchange regulations are issued by the Bapepam-LK based on Ministry of Finance decrees.IDX facilitates and regulates the Exchange––discusses, prepares, acquires approval from Bapepam-LK, issues and changes Listing Regulations, Trading Regulations and Membership Regulations. It develops a mechanism for organizing and monitoring the Exchange,implements Good Corporate Governance practice based on the IDX Corporate Governance Principles, and develops infrastructure and technologies projects with other SROs. In order to produce professional human resources that can encourage capital market growth in Indonesia, together with other SROs, IDX formed the Association of Indonesian Capital Market Education (P3MI). In 2010, P3MI, in cooperation with the



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Organizations (SROs) Role of the SROsUniversity of Indonesia, founded the Indonesia Capital Market Institute (TICMI). TICMI is focusing on giving education and training skills to aspiring underwriters, investment managers and broker/dealers.Self-Governing Rules: Peraturan Himdasun: Peraturan No.I Keanggotaan Perhimpunan Pedagang Surat Utang Negara. Peraturan Himdasun No.I Keanggotaan Perhimpunan Pedagang Surat Utang Negara. Peraturan Himdasun No.III Pengawasan Perdagangan Surat Utang Negara, Kode Etik Himdasun, dan Master Repurchase Agreement.2. Indonesian Central Counterparty (KPEI):The clearing and guarantee are executed by the KPEI.3. Indonesian Central Securities Depository (KSEI):The settlement of transactions is carried out by KSEI.4. Market Associations:The Indonesia bond market has market associations, namely: (a) Inter-Dealer Market Association for Government Securities (HIMDASUN, 26 members comprising domestic and foreign banks, and securities companies). HIMDASUN is holding a license as a market operator for government bonds and has self-governing rules, such as membership, trading, surveillance and master repurchase agreement rules. However, the market operator and self-governing rules function of HIMDASUN is currently inactive.(b) The Indonesian Fixed-Income Dealer Association.

Japan Japan Securities Dealers Association (JSDA), Tokyo Stock Exchange(TSE), TOKYO AIM,

• JSDA’s Self-regulatory Rules and Guidelines for the Bond MarketIn light of most of the bond transactions being conducted via OTC in Japan, JSDA, the full-fledged SRO for the securities industry in Japan, has issued a variety of rules and market practices for bond market participants. Some of the oldest of the JSDA’s self-regulatory rules were introduced as administrative guidance by the financial authority. As the role of the financial authority and the JSDA became clearly separated, these rules fell under the purview of the JSDA, and today function as self-regulatory rules.1. Self-Regulatory Rules JSDA members must comply with these rules. Their coverage ranges from items to be observed in outright transactions (purchase or sale) such as compliance with laws and regulations, maintenance of fairness of transactions, prohibition of extraordinary transactions,a preparation and maintenance of trading records, and reporting of trade turnovers to items to be complied with in special transactions such as repurchase transactions and OTC options transactions (such as requiring contracts, limiting the types of counterparties, etc.). Regarding the rule requiring contracts, JSDA has prepared a model format that has become the de facto standard in Japan. When Association members violate these rules, they are subject to disciplinary action by the Association (if an Association member commits a breach of the rules together with non-Association member (customer), only the Association member is subject to the disciplinary action).

Article 16 of JSDA’s “Regulations Concerning Publication of Over-the-Counter Trading Reference Prices, etc., of Bonds and Trading Prices” prescribes that Association Members must not affect the acts set forth in each of the following items and any other acts with the aim of compensating for the customer’s loss or adding to his/her profit (hereinafter referred to as “Extraordinary Transactions”). i. OTC transactions in same-bond issues in which sales and purchases are effected simultaneously at prices favorable to customers or the third parties, but unfavorable to Association Members (the price differential that corresponds to a proper interest based on a difference in the delivery date and the price differential which corresponds to the differential in delivery terms between the cash bonds and registered bonds are excluded);ii. The act of repurchasing or selling at prices favorable to customers performed in purchasing bonds from or selling bonds to customers, or transactions effected on the basis of prior promises that contracts will be cancelled (Gensaki transactions are excluded); oriii. A transaction to be conducted in collusion with a third party promising in advance on the occasion of selling a bond to a customer or purchasing it from a customer that the customer will be sure to gain profits by selling the bond to, or purchasing it from, the third party.The JSDA takes into account market conditions and the practical reality of transactions in establishing, revising and abolishing rules to achieve fair and smooth transactions in the Japanese market, thereby contributing to the protection of investors.



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Organizations (SROs) Role of the SROsDuring the rule-making procedure, a draft of rules is prepared first through deliberations mainly by Association members, then subjected to public comment and other processes, and finally approved by the Association.2. GuidelinesGuidelines are practical rules that JSDA requests participants in the bond market to comply with (thus recognized as “best practice”). As they are merely practices, those who do not comply with them are not penalized. However, as voluntary compliance with these guidelines by the overall market contributes to smooth and efficient transactions, most market participants observe the guidelines. Consequently, the JSDA collects and considers the opinions of market participants when setting new guidelines or revising or abolishing old ones. Currently, JSDA has published guidelines concerning delivery and settlement practices such as “Deadline for Settlement (Cut-off time),” “Handling of Fails Charges,” and “Order Conclusion Practices for Japanese Government Bonds When-Issued Transactions.”3. OthersBesides the above, JSDA issues from time to time notices to Association members in advance regarding standard procedures, etc., such as the standard calculation method of accrued interests to eliminate the necessity of getting individual consensus between related parties regarding the unification of procedures among market participants.

• TSE’s Role as an SROTSE fulfills a number of duties related to the operation of a securities market. It assesses companies on their suitability as listed companies, requires these companies to comply with disclosure requirements so that investors are able to make informed decisions, and provides a market place for those companies’ shares to be traded. Pursuant to the Financial Instruments and Exchange Act (FIEA), TSE has self-regulatory functions to maintain a transparent, equitable and reliable market. The provision of such a market helps support a healthy economy.The TSE has two units in relation to its self-regulatory functions: the Listing Regulation Unit and the Compliance Unit.1. Listing Regulation UnitThe Listing Regulation Unit is engaged in various activities to ensure the soundness and fairness of the securities market with a focus on issues related to listing.This Unit is comprised of the following two divisions:(i) The Listing Examination Division, which conducts examinations of companies aspiring to list on the TSE to determine each company’s listing eligibility. (ii) The Listed Company Compliance Division, which conducts examinations related to information disclosure of companies already listed on the TSE, and determines their eligibility to continue to be listed.2. Compliance UnitThe Compliance Unit is engaged in various activities to ensure the soundness and fairness of the securities market with a focus on issues related to trading participants.This Unit is comprised of the following two divisions:(i) The Participants Examination and Inspection Division, which conducts activities such as inspections of banks, securities companies, and other trading participants who possess the qualifications necessary to conduct securities trading on the TSE.(ii) The Market Surveillance and Compliance Division, which conducts detailed investigative activities to ensure that transactions, such as insider trading, market manipulation, and other potentially unfair transactions, do not occur to preserve the fairness and trustworthiness of the securities market.3. Self-Regulation Punishment and Dealing with OffendersTSE regulation handles any trading participant that violates the law or stock exchange rules in accordance with article 34 of the official trading participant regulations. The “Disciplinary Committee” is an advisory body that, in addition to conducting inquiries, also handles penalty funds, censure, trading suspension, and limiting or canceling trading capabilities, etc.



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Organizations (SROs) Role of the SROs• TOKYO AIM’s Role as TOKYO PRO-BOND Market SROTOKYO PRO-BOND Market rules and regulations are provided by the TOKYO AIM. TOKYO AIM is an SRO for the TOKYO PRO-BOND Market.Among others things, disclosure requirements under the FIEA such as Securities Registration Statements do not apply to the securities listed on the TOKYO PRO-BOND Market. Instead, disclosure requirements stipulated in the rules and regulations of TOKYO AIM, such as the “Specified Securities Information and the Issuer Filing Information”, apply as stipulated: In principle, information on listed bonds and on their issuers shall be disclosed pursuant to the TOKYO AIM’s “TOKYO PRO-BOND Market Listing Regulations and Enforcement Rules.” Also, the listing, initial offering and trading (if any) of the bonds on and in the TOKYO PRO-BOND Market are regulated under TOKYO AIM’s “TOKYO PRO-BOND Market Listing Regulations and Enforcement Rules.” In addition to these, trading on the OTC market is regulated under the JSDA’s “Self-Regulatory Rules and Guidelines for the Bond Market.” TOKYO AIM’s “TOKYO PRO-BOND Market Listing Regulations and Enforcement Rules” and JSDA’s “Self-Regulatory Rules and Guidelines for the Bond Market” have a mutually important and complimentary relationship.

Republic of Korea Korea Financial Investment Association (KOFIA),Korea Exchange (KRX)

Self-Regulatory Organizationsa. KOFIAKOFIA is an incorporated membership organization established for the purpose of maintaining business order between members, assuring fair trade, protecting investors, and promoting the sound development of financial investment services. Members of the Association are financial investment firms, general administration companies, collective investment scheme assessment companies, bond assessment companies and members under the conditions prescribed by the articles of the Association. KOFIA aims to promote fair business practices among member companies, create a fair business culture in the securities trading market and maximize the function of investor protection. As such, KOFIA undertakes such activities as self-regulation to protect investors and maintain market order among member companies; dispute mediation between members regarding their business activities; registration and management of investment advisers and managers; OTC trading management for non-listed stocks and non-listed and listed bonds; and establishment of dispute mediation rules for industry’s self-mediation of conflicts.b. KRXKRX is a stock company, which aims to fix and stabilize fair prices in the transactions of securities and exchange-traded derivatives, and facilitate the stability and efficiency of other transactions. It established and operates the stock market, the KOSDAQ Market, and the futures market. Under the Financial Investment Services and Capital Markets Act (FSCMA), the stock market was established for trading of securities, such as debt securities, equity securities, beneficiary securities, investment contract securities, derivative-combined securities and securities depositary receipts. The KOSDAQ Market was established for trading specific securities, designated by FSCMA, such as stocks. The futures market was established by the KRX for trading exchange-traded derivatives. The responsibilities of KRX include the establishment and operation of the stock market––the KOSDAQ Market––and the derivatives market; transactions of securities and exchange-traded derivatives; transaction confirmation; debt acquisition; deduction; confirmation of settlement securities, settlement item, and settlement amount; settlement execution guarantees; follow-up measures on settlement failure and settlement instruction as a result of transactions on the securities market and the derivatives market; report and disclosure of a listed corporation; and self-resolution of disputes arising from transactions in the stock market, the KOSDAQ Market and the derivative market.

Malaysia Bursa Malaysia and Financial Market Association (ACI) Malaysia

Bursa Malaysia and the Financial Market Association of Malaysia are regarded as representations of SROs in the Malaysian market.

a. Bursa Malaysia (Exchange)The Securities Commission Malaysia (SC) is the primary regulator. SC relies on Bursa Malaysia to perform extensive regulatory functions that extend beyond their market operations, including regulating members’ business conduct.Bursa Malaysia (formerly the Kuala Lumpur Stock Exchange) is now a holding company following demutualization in 2004. It is an SRO that governs its members’ conduct and member companies in securities dealings. It is also responsible for marketplace surveillance. Bursa Malaysia, on behalf of SC, supervises and enforces disclosure standards for listed companies.



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Organizations (SROs) Role of the SROsIt adopts a thematic approach to achieve its goals and objectives of ensuring effective market regulation. Under the thematic approach in discharging its regulatory role, Bursa Malaysia focuses on certain key themes. These themes are regularly reviewed to ensure relevance in a progressive environment. The six themes are as follows.1. Enhancing standards of corporate governance among listed issuers2. Improving standards of disclosure3. Promoting high standards of business conduct and self-regulation among brokers4. Enhancing the effectiveness of enforcement5. Elevating the level of education and awareness in the industry6. Managing the crisis in light of the global financial turmoil

b. Financial Market Association of Malaysia (ACI Malaysia):ACI Malaysia was established in 1974 to monitor, develop and improve industry standards, and to bring them in line with international best practice. ACI Malaysia, whose membership comprises staff from treasury operations of Malaysia’s financial institutions (including insurance companies), adopted a code of conduct for the industry. To qualify as a member of ACI Malaysia, a rigorous qualifying examination must be passed.

ACI Malaysia’s key objectives are to:• Provideanassociationforallthosewhoareactivelyengagedinthefinancialmarkets;• Constantlyreviewthetechniquesandpracticesofandinthefinancialmarketssoastodevelop,improve and maintain high standards as comparable to international practices and techniques;a. Promote and develop any scheme which may elevate the status and/or advance the interests of the Association;b. Afford opportunities for social and friendly contact amongst members;c. Establish liaison with associations or bodies in overseas countries having similar objects and to seek their assistance to participate in any seminar forum conference meeting or gathering organized by the association overseas;d. Organize talks, seminars conferences meetings and similar gatherings for Members and for the public to improve and update their knowledge of the financial markets;e. Educate, train and assess by examination or otherwise the members of the Association skilled financial markets, to award any certificate to those who successfully complete the examinations and to award prizes to outstanding candidates in examinations; andf. Establish and maintain libraries and collection of publications, research papers, papers delivered at seminars and conferences and other documents and effects whether the same are in written form or otherwise.

Philippines Philippine Dealing and Exchange (PDEx)

The Securities and Exchange Commission granted PDEx the license to act as an SRO for the Inter-Dealer, Inter-Professional and Public Markets. As an SRO, PDEx adopted the PDEx Rules that governs all transactions dealt on the PDEx Trading Platform for fixed-income securities.

Singapore Singapore Exchange (SGX)

SGX serves as a frontline regulator for the markets and clearing houses that it operates in Singapore. It works closely with the relevant regulatory authorities, including the Monetary Authority of Singapore and the Criminal Affairs Department, to develop and enforce rules and regulations to build an enduring marketplace. Being a listed exchange and frontline regulator, SGX is considered an SRO. SGX bears commercial responsibilities in addition to its regulatory duties. While this dual role may present conflicts, it has established a framework to manage such conflicts. It undertakes various regulatory functions to promote a fair, orderly and transparent marketplace as well as a safe and efficient clearing system. These functions are handled by the following regulatory departments: Issuer Regulation, Catalist Regulation, Member Supervision, Market Surveillance, Enforcement, Risk Management, Clearing Risk, Regulatory Development and Policy.

Thailand Thai Bond Market Association (ThaiBMA)

1. ThaiBMA MembersThaiBMA is a self-regulated organization licensed to run an efficient market and act as an information center for Thailand’s secondary bond market. It is responsible for developing the market, establishing market conventions and standards, and acting as a bond pricing agency. It also provides a forum for market professionals to move toward a more mature and sophisticated Thai bond market.



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Organizations (SROs) Role of the SROsa. ThaiBMA Members Membership of ThaiBMA can be classified into three types, each of which is subject to different membership fees and requirements:(1) Ordinary member is a financial institution that has a debt trading license (dealer). (2) Extraordinary member is a company that has an inter-dealer broker license. (3) Associate member is a dealer that has a monthly average trading value in the past year of less than THB100 million per month. In June 2007, membership of ThaiBMA consisted of 52 commercial banks and securities companies.

b. Roles and Functions of ThaiBMA as an SROThaiBMA oversees and monitors the conduct of its members to ensure fairness and efficiency in debt securities trading. It is committed to retaining the confidence of its membership, regulators and investors. Parts of its SRO functions include the following: 1. Perform market monitoring and surveillance to ensure that all trading activities comply with relevant laws and regulation and act as the front line to detect any unfair trading practices. 2. Establish the Ethics and Code of Conduct for members and traders. 3. Issue rules and guidelines regarding debt securities trading and good market practice. 4. Oversee for bond trader examination and registration and provide them with ongoing education to enhance their professionalism. 5. Determine enforcement procedures to penalize those who do not comply with the regulation. There is a Memorandum of Understanding (MOU) between the Securities and Exchange Commission (SEC) and ThaiBMA on Bond Market Supervisory Cooperation to enhance bond market best practices and ensure that registered traders have adequate knowledge in relevant rules, regulations and ethics, as well as knowledge in the bond market. The MOU became effective on 16 November 2005. The SEC Regulation requires that all securities companies appoint a trader registered with the ThaiBMA for bond trading.

Exchanges are regarded as SROs in Thailand.Viet Nam Vietnam Bond Market

Association (VBMA)VBMAVBMA is regarded as Viet Nam’s bond market self-governing organization. It is a non-profit organization aimed at promoting the professional and effective development of the Viet Nam bond market, guaranteeing the legitimate rights and interests of members and, at the same time, ensuring national interests.1. VBMA’s Roles and Functionsa. Standardize trading practices and market conventions for bonds and other debt instruments of similar nature in the Vietnamese bond market; b. Enhance regional and international integration of the bond market in general and of the members in particular by encouraging the adoption of global best practices by market participants under the conditions of the Vietnamese bond market; c. Establish the code of conduct and ethics to govern the relationship of market participants to ensure equality; d. Improve market expertise and skills by conducting activities to aggregate and analyze bond information, consulting, training and provision of facilitating services to members and other related participants in trading bonds and other debt instruments of similar nature in the Vietnamese bond market; e. Serve as a forum and bridge for exchanging and updating bond information, for strengthening collaboration and mutual understanding among its members, and between its members and Vietnamese regulatory authorities, as well as the related international organizations; comment on related policies; support state competent bodies in improving policies and legal framework for the bond market in Viet Nam; andf. Update, aggregate, store and build a database on bond market information, thus helping to increase the transparency of the Vietnamese Bond Market.

2. History of VBMAIn the recent years, the government has been conducting a reform of Viet Nam’s financial market. Besides the state’s actions, many organizations, businesses as well as the bond market participants have made great efforts to develop the bond market. In November 2006, a group of local and international commercial banks, securities companies, fund management companies,



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Organizations (SROs) Role of the SROsand insurance companies formed the Vietnam Bond Market Forum (VNBF) that was intended to promote bond trading through disseminating and sharing market information, and standardizing commercial activities in the bond market in Viet Nam. The VNBF was directed by an executive board voted for by representatives of the members that were active in the Vietnamese Bond Market. Its executive board worked on a part-time basis, met monthly to discuss on and consent to the VNBF’s plan of activities and allocation of work. Over a period of 3 years, VNBF’s activities brought initial results for market development. However, operating as a forum had its own limitations such as matters concerning legal status, fundraising, and public recognition. In March 2007, VNBF members collaborated and decided to start procedures to apply for an official permit for the establishment of a professional association in compliance with the laws of Viet Nam, thus helped raise its legal status and financial capacity aimed to strengthen activities to effectively and practically contribute to the development of the bond market in general and bring about benefits to the members in particular. The association was named the Vietnam Bond Market Association (VBMA). At that time, VNBF had a total of more than 50 members and planned to increase the number to 100 or more when it becomes an association. Viet Nam’s authorities such as the State Securities Commission, the Ministry of Finance, and the State Bank of Vietnam were all in favor of the transformation from a forum to an association. VNBF officially established its office in May 2007, with an executive board secretary working full-time and is responsible for the operations of the office. The draft charter was first completed in June 2008. In August 2008, the Ministry of Finance (MOF) approved the list of the Preparation Committee for establishing the VBMA. On 22 May 2009 the Minister of Interior issuedanofficialdecisionallowingtheestablishmentoftheVBMA.　On31December2009,basedon the submission letter of the Association’s Chairman, the Minister of Interior decided to approve VBMA’s Charter, thus legally enabling the Association to set up its management and execution bodies aimed to execute and coordinate VBMA’s activities. The Executive Committee, Standing Committee, VBMA Office commenced operations in early 2010 and have stabilized operations step by step. At the end of November 2010, VBMA had 59 members, with 54 institutional members being local and foreign commercial banks, companies in finance, leasing, securities, fund management, insurance and law consultancy, and five individual members.

3. Code of ConductThe Code of Conduct (COC) is intended to be observed by VBMA member organizations, which engage in bond trading activities, whether as part of their market-making or proprietary trading, and/or brokerage services for bond transactions. Its main aim is to set out the principles and standards which VBMA members should follow when conducting bond trading business in a manner that exhibits a high degree of professionalism, integrity, and fairness. Based on the proposal made by the VBMA, the Ministry of Finance officially authorized VBMA to release the COC. To confirm their commitment, 21 full and associate members affixed their signatures to the MOU for adherence to the COC and agreement to supply information to VBMA’s website. The signing was done in the presence of representatives from the MOF, State Securities Commission, Hanoi Stock Exchange, the Vietnam Securities Depository, international agencies, and local television. Other members were to sign the MOU in due course as they were not able to attend the MOU signing or they still needed the opinion of their respective legal departments as a procedure before signing.

a Extraordinary Transactions are defined under article 16 of JSDA’s Regulations Concerning Publication of Over-the-Counter Trading Reference Prices, etc., of Bonds and Trading Prices. It prescribes that “Association Members must not affect the acts set forth” in the items enumerated in the regulation “and any other acts with the aim of compensating for the customer’s loss or adding to his/her.”



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V. Definition of Securities (Bonds)

Table 5. Definition of Securities (Bonds)

Jurisdiction Definition of Securities (Bonds)

People’s Republic of China (PRC)

There is no original definition of securities. The definition of securities is not confined to a single law. Securities concepts may differ by industry or competent authority in PRC. Recent securities law defines stocks and standard bonds; however, some bonds do not fall under the Securities Law. The Corporation Law and Enterprise Law co-exist and, hence, may either set the rules for issuance of securities, depending on industry, issuer, and type of security. The official definition of securities given in the revised Securities Law of PRC in 2005 is: The present Law shall be applied to the issuance and transaction of stocks, corporate bonds as well as any other securities as

lawfully recognized by the State Council within the territory of the People’s Republic of China. In case where there is no such provision in the present Law, the provisions of the Corporation Law of the People’s Republic of

China and other relevant laws and administrative regulations shall be applied. Any listed trading of government bonds and share of securities investment funds shall be governed by the present Law. Where there is any special provision in any other law or administrative regulation, the special provision shall prevail. The measures for the administration of issuance and transaction of securities derivatives shall be prescribed by the State Council according to the principles of the present Law.

Hong Kong, China For bonds to be listed on the Hong Kong Stock Exchange or cleared through the Central Moneymarkets Unit (CMU), they must satisfy the criteria set out in, among others, the Listing Rules and the CMU Service Reference Manual (which is accessible to CMU members only), respectively.The legal definition of securities is laid down in the Securities and Futures Ordinance (SFO) of the Laws of Hong Kong, and administered by the Securities and Futures Commission.1. Definition of “CMU Instruments” in the CMU Service Reference Manuala. CMU InstrumentsCMU Instruments are money market and capital market instruments which are specified in the CMU Service Reference Manual as capable of being held within the CMU Service.

b. CMU Instruments include: • Asset-BackedSecurities• EquityLinkedInstrument• FixedRateCertificateofDeposit• GovernmentBond• FloatingRateCertificateofDeposit• Bonds• FixedRateNotes• FloatingRateNotes• CommercialPapers• Mortgage-backedSecurities• FixedRateLinkedSecurities• FloatingRateLinkedSecurities• ZeroCouponCertificateofDeposit• ZeroCouponNotes• BillsofExchangeotherthantradebills• AnyotherHongKongdollarmoneymarketandcapitalmarketinstrumentsasthe[HongKongMonetaryAuthority]mayspecify

from time to time2. Definition of “securities” in the SFO and the Listing Rulesa. Section 1 of Part 1 of Schedule 1 to the SFO “Securities” means -(i) shares, stocks, debentures, loan stocks, funds, bonds or notes of, or issued by, a body, whether incorporated or unincorporated,

or a government or municipal government authority; (ii) rights, options or interests (whether described as units or otherwise) in, or in respect of, such shares, stocks, debentures, loan

stocks, funds, bonds or notes; (iii) certificates of interest or participation in, temporary or interim certificates for, receipts for, or warrants to subscribe for or

purchase, such shares, stocks, debentures, loan stocks, funds, bonds or notes; (iv) interests in any collective investment scheme; (v) interests, rights or property, whether in the form of an instrument or otherwise, commonly known as securities; (vi) interests, rights or property which is interests, rights or property, or is of a class or description of interests, rights or property,

prescribed by notice under section 392 of this Ordinance as being regarded as securities in accordance with the terms of the notice;

(vii) a structured product that does not come within any of the paragraphs (i) to (vi) but in respect of which the issue of any advertisement, invitation or document that is or contains an invitation to the public to do any act referred to in section 103(1)(a) of this Ordinance is authorized or required to be authorized, under section 105(1) of this Ordinance,


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Jurisdiction Definition of Securities (Bonds)But does not include-(1) Shares or debentures of a company that is a private company within the meaning of section 29 of the Companies Ordinance

(Cap 32);(2) Any interest in any collective investment scheme that is-

(1) a registered scheme as defined in section 2(1) of the Mandatory Provident Fund Schemes Ordinance (Cap 485), or its constituent fund as defined in section 2 of the Mandatory Provident Fund Schemes (General) Regulation (Cap 485 sub. leg. A);

(2) An occupational retirement scheme as defined in section 2(1) of the Occupational Retirement Schemes Ordinance (Cap 426); or

(3) a contract of insurance in relation to any class of insurance business specified in the First Schedule to the Insurance Companies Ordinance (Cap 41);

(3) any interest arising under a general partnership agreement or proposed general partnership agreement unless the agreement or proposed agreement relates to an undertaking, scheme, enterprise or investment contract promoted by or on behalf of a person whose ordinary business is or includes the promotion of similar undertakings, schemes, enterprises or investment contracts (whether or not that person is, or is to become, a party to the agreement or proposed agreement);

(4) Any negotiable receipt or other negotiable certificate or document evidencing the deposit of a sum of money, or any rights or interest arising under the receipt, certificate or document;

(5) any bill of exchange within the meaning of section 3 of the Bills of Exchange Ordinance (Cap 19) and any promissory note within the meaning of section 89 of that Ordinance;

(6) any debenture that specifically provides that it is not negotiable or transferable (excluding a debenture that is a structured product in respect of which the issue of any advertisement, invitation or document that is or contains an invitation to the public to do any act referred to in section 103(1)(a) of this Ordinance is authorized, or required to be authorized, under section 105(1) of this Ordinance);

(7) interests, rights or property which is interests, rights or property, or is of a class or description of interests, rights or property, prescribed by notice under section 392 of this Ordinance as not being regarded as securities in accordance with the terms of the notice;

b. Section 7 of Part 1 of Schedule 1 to the SFOReferences to securities of a corporation In this Ordinance, a reference to securities (however described) as those of a corporation shall, unless the context otherwise requires, be construed as a reference to securities (having the applicable meaning, whether under section 1 of Part 1 of Schedule 1 to this Ordinance or otherwise) which are-(i) issued, made available or granted by the corporation; (ii) proposed to be issued, made available or granted by the corporation; or(iii) proposed to be issued, made available or granted by the corporation when it is incorporated.

c. Listing Rules - Rule 1.01 of Chapter 1 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong under this section before the definitiona. “Debt securities” means debenture or loan stock, debentures, bonds, notes and other securities or instruments acknowledging,

evidencing or creating indebtedness, whether secured or unsecured and options, warrants or similar rights to subscribe or purchase any of the foregoing and convertible debt securities.

b. “Equity securities” means shares (including preference shares and depositary receipts), convertible equity securities and options, warrants or similar rights to subscribe or purchase shares or convertible equity securities, but excluding interests in a Collective Investment Scheme.

Indonesia The definition of securities is not confined to a single law.Original relevant definitions found in the Commercial Code left by the Dutch, which remain in force: promissory note (PN), cheque, and bill of exchange.There is no mention of corporate bonds and debt instruments in the Company Law; however, they are often described or covered in the Articles of Association of companies.The clearest definition of securities can be found in the Capital Market Law No. 8 (1995), which states that: “Securities are promissory notes, commercial paper, shares, bonds, evidences of indebtedness, Participation Units of collective investment contracts, futures contracts related to Securities, and all derivatives of Securities.” Pursuant to the Elucidation of the Capital Market Law No. 8, “derivatives” refer to rights that are derived from either debt or equity securities, such as options or warrants. An “option” is the right to purchase or sell within a certain time, a specified number of Securities at a specified price. A “warrant” is a security issued by a company giving the holder the right, 6 months or more after the Securities are issued, to subscribe to shares of the company at a specified price. Today, debt instruments can be divided into capital market and money market. The capital market covers bonds while the money market covers PN, medium-term notes (MTNs), commercial papers (CPs), Certificate of Central Bank (Sertifikat Bank Indonesia, SBI); most instruments have been introduced by foreign bank participants over recent years. MTN and CP are synonymous for all intents and purposes. Legal treatises exist but there is no statutory definition of these instruments.Commercial bills exist, under the freedom of contract provisions used by non-bank issuers; for bank issues, relevant banking provisions apply.



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Jurisdiction Definition of Securities (Bonds)Japan 1. The Companies Act defines corporate bonds.

2. Existence of uniform legal framework for all types of securities(i) Law Concerning Book-Entry Transfer of Corporate Bonds, Stocks, and Other Securities provides the legal basis for the book-entry

transfer system and dematerialization of all securities.(ii) The Japan Securities Depository Center (JASDEC) plays the role of the Central Securities Depository (CSD) in the book-entry

transfer system in securities other than government bonds. Under this law, the term CSD means “Designated Depository Institution.” The book-entry bond transfer system participants must observe the rules established by the Depository Institution.

3. Dematerialization or Immobilization vs. Physical securities(a) As described above, according to this law and the above system for securities to be distributed, complete dematerialization has

been achieved.(b) The Companies Act allows for physical bond certificates to be issued regardless of the book-entry transfer method. However, in

this case, distribution in the market cannot be expected, and cannot also be allowed to be owned in tax-exempt status under the Japanese taxation system.

Republic of Korea In principle, bonds are defined in the Financial Investment Services and Capital Market Act (FSCMA), as “debt securities”, including local government bonds, special bonds, corporate bonds, corporate commercial papers, and other similar instruments.Revisions to the Commercial Act with regards to corporate bonds (to take effect in 2012) provide a basis for corporate bonds diversity. This should resolve the discrepancy in concept about securities between the Commercial Act and the FSCMA. While the former adopts a positive system to define securities, the latter uses a negative system that allows the issue of any new and innovative securities unless prohibited explicitly by law. Under the previous circumstances, there was a lingering controversy whether any new securities permitted under the FSCMA fell under the categories of corporate bonds as defined in the Commercial Act. The updated bill adopts a wider definition for corporate bonds, and it creates a legal basis on which diversified securities can be issued. This will put an end to the controversy.

Malaysia According to the Capital Markets and Services Act (CMSA), securities are defined as: (a) debentures, stocks or bonds issued or proposed to be issued by any government; (b) shares in or debentures of, a body corporate or an unincorporated body; or (c) unit trusts or prescribed investments, and include any right, option or interest in respect thereof, but do not include futures contracts.

Definition of debentures: “Debenture” includes debenture stock, bonds, notes and any other evidence of indebtedness of a corporation for borrowed monies, whether or not constituting a charge on the assets of the corporation, but shall not be construed as applying to any of the following:(i) any instrument acknowledging or creating indebtedness for, or for money borrowed to defray the consideration payable under, a

contract for sale or supply of goods, property or services or any contract of hire in the ordinary course of business; (ii) a cheque, banker’s draft or any other bill of exchange or a letter of credit; (iii) a banknote, guarantee or an insurance policy; (iv) a statement, passbook or other document showing any balance in a current, deposit or savings account; (v) any agreement for a loan where the lender and borrower are signatories to the agreement and where the lending of money is in

the ordinary course of business of the lender, and any promissory note issued under the terms of such an agreement; or(vi) any instrument or product or class of instruments or products as the Minister may, on the recommendation of the Commission,

prescribed by order published in the Gazette.

Philippines Under section 3 of the Securities Regulation Code, securities are shares, participation or interests in a corporation or in a commercial enterprise or profit-making venture, evidenced by a certificate, contract, instrument, whether written or electronic in character. It includes:a. Shares of stock, bonds, debentures, notes, evidences of indebtedness, asset-backed securities;b. Investment contracts, certificates of interest or participation in a profit sharing agreement, certificates of deposit for a future

subscription;c. Fractional undivided interests in oil, gas or other mineral rights;d. Derivatives like option and warrants;e. Certificates of assignments, certificates of participation, trust certificates, voting trust certificates or similar instruments;f. Proprietary or non-proprietary membership certificates incorporations; andg. Other instruments as may in the future be determined by the Securities and Exchange Commission.The Philippine Dealing and Exchange (PDEx) Rules for the Fixed Income Securities Market, as amended (PDEX Rules) define a security as fixed-income securities, including government securities.

Singapore “Securities” is defined in the Securities and Futures Act (SFA) in section 2(1), section 196A, section 214, and section 239.Section 2(1) Interpretation:2. (1) In this Act, unless the context otherwise requires — “securities” means — (i) debentures or stocks issued or proposed to be issued by a government;(ii) debentures, stocks or shares issued or proposed to be issued by a corporation or body unincorporated;(iii) any right, option or derivative in respect of any such debentures, stocks or shares;(iv) any right under a contract for differences or under any other contract the purpose or pretended purpose of which is to secure a

profit or avoid a loss by reference to fluctuations in —



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Jurisdiction Definition of Securities (Bonds)(a) the value or price of any such debentures, stocks or shares;(b) the value or price of any group of any such debentures, stocks or shares; or(c) an index of any such debentures, stocks or shares;

(v) any unit in a collective investment scheme;(vi) any unit in a business trust;(vii) any derivative of a unit in a business trust; or(viii) such other product or class of products as the Authority may prescribe,

but does not include —(a) futures contracts which are traded on a futures market;(b) bills of exchange;(c) promissory notes;(d) certificates of deposit issued by a bank or finance company whether situated in Singapore or elsewhere; or(e) such other product or class of products as the Authority may prescribe as not being securities;

Section 196A: Interpretation of this Division 196A. In this Division — “debenture” has the same meaning as in section 2 and, in relation to a business trust, means any debenture issued by the trustee of the business trust in its capacity as trustee of the business trust; “securities” — (a) in relation to a corporation, for the purposes of sections 196 (a) (i) and (b) (i), 198, 202 and 203, means — debentures, stocks or shares issued or proposed to be issued by a corporation; any right, option or derivative in respect of any such debentures, stocks or shares; any right under a contract for differences or under any other contract the purpose or pretended purpose of which is to secure a

profit or avoid a loss by reference to fluctuations in — (i) the value or price of any such debentures, stocks or shares; (ii) the value or price of any group of any such debentures, stocks or shares; or (iii) an index of any such debentures, stocks or shares; or such other product or class of products as the Authority may prescribe, but does not include — (AA) futures contracts; (BB) bills of exchange;

Section 214: Interpretation of this Division 214. In this Division — “debenture” has the same meaning as in section 2 and, in relation to a business trust, means a debenture issued by the trustee of the business trust in its capacity as trustee of the business trust;

Section 239: Preliminary provisions 239. (1) In this Division — “debenture” includes debenture stock, bonds, notes and any other debt securities issued by a corporation or any other entity, whether or not constituting a charge on the assets of the issuer but does not include — (d) a cheque, letter of credit, order for the payment of money or bill of exchange;(e) subject to the regulations made under this Act, a promissory note having a face value of not less than USD100,000 and having

a maturity period of not more than 12 months; or(f) for the purposes of the application of this definition to a provision of this Act in respect of which any regulations made

thereunder provide that the word “debenture” does not include a prescribed document or a document included in a prescribed class of documents, that document or a document included in that class of documents, as the case may be;

“debenture issuance program” means any scheme or arrangement by an entity for the issue of debentures or units of debentures where only part of the maximum amount or aggregate number of debentures or units of debentures under the program is offered initially and a further tranche or tranches may be offered subsequently;

Thailand a. Definition in the Securities and Exchange Act: The Securities and Exchange Act, B.E. 2535, section 4 stipulates the definition of securities’ as:,

(1) Treasury bills;(2) Bonds;(3) Bills;(4) Shares;(5) Debentures;(6) Investment units which are instruments of evidence representing the rights to the property of a mutual fund;(7) Certificates representing the rights to purchase shares;(8) Certificates representing the rights to purchase debentures;(9) Certificates representing the rights to purchase investment units;(10) Any other instruments as specified by the Securities and Exchange Commission (SEC).



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Jurisdiction Definition of Securities (Bonds)“Bill” means any bill issued for raising funds from the public as specified in the notification of the SEC. “Debenture” means any debt instrument or whatever name excluding bills, divided into units, each with equal value and a predetermined rate of return, issued by any company to a lender of purchaser, representing the right of the holder of such instrument to receive money or other benefit.

b. Debentures in the Public Limited Companies Act, B.E. 2535 (1992) Chapter XI, Debentures: Section145. The borrowing by the company by means of the issuance of debentures for offer

for sale to the public shall be in accordance with the law on securities and stock exchange, and section 25 shall apply mutatis mutandis. The resolution approving the issuance of debentures under paragraph one shall require the resolution of the meeting of shareholders passed by a vote of not less than three-fourths of the total number of votes of the shareholders attending the meeting and having the right to vote.

Chapter III, Offer of Shares for Sale to the Public: Section 24. The offer of shares for sale to the public or to any person shall be in accordance with the law on securities and stock exchange. Section 25. The promoters or the company shall submit to the Registrar a copy of the documents relating to the offer of shares for sale to the public which shall be prepared and submitted to authorities under the law on securities and stock exchange, within fifteen days as from the date of submission to such authorities in accordance with the rules, procedures and conditions prescribed by the Registrar.

Viet Nam Law on Securities: Pursuant to article 3 of the amended and supplemented Securities Law No. 62/2010/QH12 and article 6 of Securities Law No. 70/2006/QHll, securities mean evidence from an issuing organization certifying the lawful rights and interest of an owner with respect to an assets or capital portion. Securities may take the form of certificates, book entries or electronic data, and shall comprise the following types:ü Shares, bonds and investment fund certificates; ü Share purchase rights (rights issue), warrants, call options, put options, future contracts, groups of securities and securities

indices; ü Investment capital contribution contracts; ü Other types of securities stipulated by Ministry of Finance.


VI. Event of Default and Payment Default

Table 6. Event of Default and Payment Default

Jurisdiction Definition and related issues in the event of default and payment defaultPeople’s Republic of China (PRC)

In PRC, there is no legal definition of default. Generally speaking, the market works on the basis that bonds approved by all competent authorities have a slim chance of default. This remains untested so far. However, the concept of event of default in market practice is increasingly seen as a case of missed payment. The declaration of default remains at the determination of investors, through bondholder meetings.1. Constituting an event of default. As far as recognition of an event of default is concerned, bond issue documentation may

not have a definition or sufficient detail. The People’s Bank of China has general rules on default in Inter-bank Bond Market instruments, but cover limited security types. A typical definition is as follows: If an issuer cannot pay 90 days after the maturity of the bond, it may constitute an event of default.

2. Timing of default. However, a necessary distinction may be made on the timing of default, i.e. no payment is made on the payment date (during the 24 hours of payment day, it is constituted as “default”), or no payment during business hours of the payment day (i.e., by market close, it is “accidental default”). Usually, default happens at the end of the day.

3. Payment default in the Exchange market/Inter-bank Bond Market,(a) Participant default. An event of participant default is either the default in payment of any sum payable to the China

Securities Depository and Clearing Corporation (CSDCC) or China Central Depository and Clearing (CCDC), or the default in delivery of securities to the CSDCC or CCDC.

(b) Participant-versus-investor default: An event of participant-versus-investor default is either a client default in any of the payment obligations due to the clearing participant (in the case of the Exchange market) or a client default in delivery obligations owed to the clearing participant (in the case of the Exchange market).

The clearing participant (in the case of the Exchange market) should recognize and declare an event of default. No case of default of bonds has taken place in the Inter-bank Bond Market yet, and there are no known cases of default for corporate bonds.4. Covenants or provisions related to default in issue documentation. A cross-default clause is increasingly being introduced

in issue documentation, and an acceleration clause is more likely to be included in issue documentation these days. Banks can offset debts against assets of the same account holder; offset (of liabilities versus assets) is permitted by law. A “pari passu clause” is not used. An issuer is the debtor on a specific issue. This is true in particular for subordinate debt.



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Jurisdiction Definition and related issues in the event of default and payment defaultHong Kong, China 1. Terms of Events of Default

a. Events of default are a matter of negotiation but, generally, cover non-payment of principal or interest by the issuer, non-compliance with obligations under the bond instruments, non-payment of other indebtedness of the issuer or guarantor when due; the occurrence of certain specified events, for example, change of control, commencement of proceedings against the issuer, passing of an effective resolution for the winding up, administration or dissolution of the issuer or guarantor.

b. Events of default are usually found in the trust deed, fiscal agency agreement or deed of covenant (executed by the issuer and guarantor).

2. Declaration of Defaulta. Fiscal agent structure. The noteholders may give written notice to the Issuer to declare that the notes would become forthwith

due and payable. This direct right is contained in a deed of covenant.b. Trustee structure. The trustee may at its discretion give notice of default by: Declaring the notes immediately due and repayable (with a certified opinion that the event is materially prejudicial to the

interests of the holders of the Notes); or If so directed in writing by the holders of at least 25% in principal amount of the notes, or by an extraordinary resolution of the

holders of the notes, declaring all the notes immediately due and repayable.

The trustee may institute proceedings against the issuer to enforce repayment of the principal of the notes with accrued interest, and to enforce the provisions of the trust deed. However, noteholders are not entitled to proceed directly against the issuer unless the trustee fails to do so within a reasonable period and such failure is continuing. The noteholders’ interests are represented by the trustee.

c. When the default happens. The default may happen at any time during the day.

Indonesia The event of default is a condition where the Issuers can be declared default.Bapepam-LK regulation requires that the procedure to declare default be clearly stated on the Trustee Contract.Pursuant to prevailing Bapepam-LK Regulation, the Trustee Contract shall contain a list of events of default, among others: 1. The issuer does not pay the principal and interest of the debt securities and Sukuk on its maturity ;2. The actual condition about the collateral or the issuer status and its management is different from the information and

explanation provided by the Issuer. 3. The issuer has been declared default in relation to credit agreement by one or more of its creditor (cross default). For instance,

cross-default is possible, and clauses are used in contracts; grace periods may apply.4. Suspension of payment (moratorium) of the issuer is declared, and;5. The issuer does not perform other obligations stated in the trustee contract.Bapepam-LK Rule No. VI.C.4 also requires a Contract of Debt Securities Trustee to contain a clear procedure to solve the event of default or state a default. Usually, when an event of default occurs, the trustee would require the issuer to take corrective action to solve the problem in a specific time period. If the issuer does not take the necessary corrective actions, the trustee may invite all bondholders and conduct a general meeting of bondholders to seek clarification from the issuer regarding the failure. If the meeting does not accept the issuer’s explanation and clarification, the meeting may:

restructure the debt; or declare default status to the Issuer.set another bondholders meeting to decide whether the default will be noticed or not.

Japan The Commercial Code of Japan stipulates the event of default. In relation to this, under the New Companies Act adopted in June 2005 (enforced in May 2006), a commissioned company for bondholders and its liability and power have been expanded.

Republic of Korea When an event of default occurs to the issuer, which is one of the major details of an entrustment contract based on relevant provisions in the contract, the trustee announces this information to the trust and Bond Information Service (BIS through www.kofiabond.or.kr) operated by the Korea Financial Investment Association, which enables notification to all the investors.

Malaysia The events of default are usually negotiated terms but the Trust Deed Guidelines issued by the Securities Commission provide for the minimum content requirements for such trust deed. The trust deed and the terms and conditions of debentures must provide for, but should not be limited to, the following:1. a list of all events, the occurrence of any of which would entitle or oblige the trustee to declare the debentures immediately due

and repayable (to the extent appropriate and subject to any materiality thresholds and provision for remedy or period of grace which may be negotiated) including the following:

a. where there is any default in payment of any principal, premium or interest or profit under the debentures or Sukuk;b. where a winding up order has been made against the issuer;c. where a resolution to wind up the issuer has been passed;d. where a scheme of arrangement under section 176 of the Companies Act 1965 has been instituted against the issuer;e. where a receiver has been appointed over the whole or a substantial part of the assets of the issuer;f. where there is a breach by the issuer of any term or condition in the debentures or Sukuk or provision of the trust deed or

of any other document relating to the issue, offer or invitation in respect of the debentures or Sukuk;



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Jurisdiction Definition and related issues in the event of default and payment defaultg. where any other indebtedness of the issuer becomes due and payable prior to its stated maturity or where the security

created for any other indebtedness becomes enforceable;h. Where there is a revocation, withholding, invalidation or modification of a license, authorization or approval that impairs

or prejudices the issuer’s ability to comply with the terms and conditions of the debentures or Sukuk, or the provisions of the trust deed or any other document relating to the issue, offer or invitation in respect of the debentures or Sukuk.

2. The powers of the trustee in any of the events described in paragraph (i) include:a. the powers of the trustee to declare the debentures or Sukuk immediately due and payable at its discretion;b. the powers of the trustee to declare the debentures or Sukuk immediately due and payable as directed by a special

resolution;c. the powers of the trustee to enforce the provisions of the trust deed;d. the circumstances under which the trustee shall be bound to enforce the provisions of the trust deed; ande. the circumstances under which the holders of the debentures or Sukuk are entitled to pursue their rights and remedies.

Philippines The following descriptions are taken from a sample prospectus of corporate bonds in the Philippines and have been generalized for reference.

a. Event of Default: The Issuer shall be considered in default under the Bonds and the Trust Indenture or Trust agreement in case any of the defined events (exhibit the examples of the items, each an “Event of Default”) shall occur and is continuing: Non-payment default, Insolvency Default, Cross default, Winding up proceedings, Representation/Warranty Default, Covenant Default, Breach of Obligations Default, Expropriation Default, Judgment Default, Writ and Similar Process Default, Closure Default, Validity Default, Change of Control Default.

b. Consequences of Default: If any one or more of the Events of Default shall occur and be continuing after the lapse of the period given to the Issuer within which to cure such Event of Default under the Trust Indenture or Trust Agreement, if any, or upon the occurrence of such Event of Default for which no cure period is provided,

(i) the Trustee, upon the written direction of the Majority Bondholders, by notice in writing delivered to the Issuer, or (ii) the Majority Bondholders, by notice in writing delivered to the Issuer and the Trustee, or (iii) the Trustee, in its discretion, in case of a Non-Payment or Insolvency Default, may declare the Issuer in default and declare the principal of the Bonds then outstanding, together with all interest accrued and unpaid thereon and all amounts due thereunder, to be due and payable not later than (for instance) 5 Business Days (the periods provided in the Trust Agreement and in these Terms and Conditions) from the receipt of the declaration of default (“Default Payment Date”) with copy to the Paying Agent, who shall then prepare a payment report in accordance with the Registry and Paying Agency Agreement. Thereupon, the Issuer shall pay in accordance with the Registry and Paying Agency Agreement.

Singapore The events of default are usually negotiated terms in Indenture or Trust deed.

Thailand Generally, an event of default will be stipulated in the terms and conditions of the debenture. Under Thai law, the terms and conditions are deemed to be an agreement between the debenture issuer and the debenture holder. The following are examples of “events of default” that are normally stipulated in the terms and conditions of a debenture:1. Non-payment: If the Issuer makes a default in the payment of any principal, premium or interest due in respect of the Bonds.2. Breach of Other Obligation: If the Issuer does not perform or comply with one or more of its other obligations under the Bonds,

the Trust Deed or Terms and Conditions. 3. Insolvency: If the Issuer or any of its group entities becomes insolvent or bankrupt, or is unable to pay its debts, stops, suspends

or threatens to stop or suspend payment of all or a material part of its debts, by Court order.4. Enforcement Proceeding: If a distress, attachment, execution, seizure before judgment or other legal process is levied, enforced

or sued out on or against any material part of the property, assets or turnover of the Issuer or any of its group entities and is not discharged or stayed within 60 days.

5. Winding-up: If an order is made or an effective resolution passed for the winding-up or dissolution or administration of the Issuer or any of its group entities.

6. Security Enforced: If an encumbrancer takes possession or an administrative or other receiver or an administrator or other similar officer is appointed of the whole or any substantial part of the property, assets or turnover of the Issuer or any of its group entities and is not discharged within 60 days.



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Jurisdiction Definition and related issues in the event of default and payment defaultThe debenture holder and/or debenture holder representative (Trustee) will normally recognize and declare the default. The declaration of event of default will be made in accordance with the terms and conditions of the debentures. Thai law is silent as to whether the default will happen during the day or at the end of the day. However, in practice, the default will immediately occur when the debenture holder and/or debenture holder representative (Trustee) declares an event of default. The precedent of a default of debentures normally occurs on the grounds that the debenture issuer fails to pay interest and to repay the principal to the debenture holder when due.

Viet Nam Bond settlement default: Settlement default in domestic bond transactions traded on an exchange has not occurred yet. If a default occurs in securities or cash settlement, the principles and resolution sequence set out in the settlement regulations of the Vietnam Securities Depository apply. In Viet Nam, there has been no precedent of a default of a corporate issuer on interest and principal payments. However, a bondholder is a creditor of the issuer so, if it happens, the Bankruptcy Law (No. 2112004/QHll) will be applied, and issuer is required to announce the bankruptcy status.

Source: ADB Consultants, based on research materials and market visit information

VII. Existence of the Meeting of Bondholders System

Table 7. Existence of Bondholders Meeting System

JurisdictionExistence of

bondholder meeting system RemarksPeople’s Republic of China

Yes The declaration of default remains at the discretion of investors, through bondholder meetings. The National Association of Financial Market Institutional Investors (NAFMII) has formulated a self-regulatory management system for the secondary market and promulgated self-regulatory normative documents such as the “Working Guidelines for Market Makers of the Inter-bank Bond Market,” “Self-regulatory Rules for Bond Trading in the Inter-bank Bond Market,” and “Rules for the Meetings of the Holders of Debt Financing Instruments of Non-financial Enterprises in the Inter-bank bond Market” to strengthen self-regulatory management of members when carrying out trading activities, to regulate the behavior of related trader, maintain the legitimate competitive order of the market, and promote the sound and standard development of the market.

In 2010, NAFMII formulated the “Rules for the Meetings of the Holders of Debt Financing Instruments of Non-financial Enterprises in the inter-bank Bond Market,” stipulating that when the issuer (1) fails to pay in full amount of principal or interest, (2) transfers all or part of the repayment obligation, (3) changes the credit enhancing arrangement or credit enhancement agencies, (4) implements capital reduction, merger, division, dissolution, bankruptcy or receivership and other significant cases, a bondholders’ meeting may be convened to protect the legitimate rights and interests of bondholders.

Hong Kong, China Yes -

Indonesia Yes The issuer is responsible for the resolution, based on the general meeting of bondholders’ resolution.

Japan Yes -

Republic of Korea Yes -

Malaysia Yes The trustee is responsible for a resolution of a meeting of bondholders. Meetings may be convened at the request of the issuer, trustee or an agreed percentage of debenture holders. There should be a quorum requirement for the transaction of business at the meetings. The quorum for the passing of special resolutions should be explicitly stated in the trust deed.

Philippines Yes -

Singapore Yes -

Thailand Yes -

Viet Nam No In Viet Nam, there is no official concept of the meetings of bondholders yet.Source: ADB Consultants, based on research materials and market visit information.


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VIII. The System of Commissioned Company, Bond Representative and Trustee

Table 8. The System of Commissioned Company, Bond Representative and Trustee

Jurisdiction Name of SystemStatus

The System of Commissioned Company, Bond Representative and TrusteePeople’s Republic of China

Commissioned company • Enterprisebondshavethisconcept;whetheritworksisuntested.

Hong Kong, China Trustee • TheappointmentofatrusteeisdoneunderprovisionsoftheTrustIndenture.• Theappointmentofatrusteeisnotmandatory.• Norecentissuesorprogramsfeaturedtrustee.

Indonesia waliamanat　(Trustee) • Bapepam-LKhasguidelinesforregistrationandthedutiesasTrustee.• Trusteesmustmakeacontract,perwaliamanatan, with the corporate issuer in

accordance with the conditions set out by Bapepam-LK.

Japan Commissioned person or Commissioned company

• StipulatedinCompanies Act.• ItshallnotbeappliedincasebondminimumunitisJPY100millionormore.

Republic of Korea Commissioned company (Revised commercial law will take effect in 2012)/(Old Commercial Act)

• StipulatedintherevisedCommercial Act.• Theappointmentofacommissionedcompanyisnotmandatory.• TheappointmentofacommissionedcompanyisdoneunderprovisionsoftheTrust

Indenture.

Malaysia Trustee • Trustdeedandtrusteeisrequired;basedonTrustee Corporation Act.• TrusteesshouldbeapprovedbySecuritiesCommission(SC)andlistedonSCwebsite.• AAAissuersmaynotneedtrustee,butsuchissuesneedtobeapprovedbySC,and

default definitions need to be included in bond issue documentation.

Philippines Trustee - for Public offering. Facility Agent (FA) - for Private Placement

• Publicofferingbondissuestypicallyhaveatrustee.• Corporatebondissuersmustappointatrustee.• PrivateplacementsrequireaFacilityAgent(FA)thatfunctionsastrusteeandfiscal

agent; in absence of specific regulations, issue documentation would indicate that FA works on behalf of investors.

Singapore Trustee • Anissuermustappointasuitabletrusteetorepresenttheholdersofitsdebtsecurities listed on the Exchange.

However, a trustee is not required for a debt issue that is offered only to sophisticated or institutional investors and is traded in a minimum board lot size of SGD200,000 or its equivalent in foreign currencies following listing. (Refer to article 308 “Part IV Trustee and Trust Deed” of Chapter 3 (Debt Securities) of the SGX Main Board Listing Rule for detailed information on the suitability of the trustee and the provisions to be included in the trust deed.)

Thailand Bondholder Representative or Trustee • Notrusteeconceptforbonds;butbondrepresentative(BR).• BRhasfiduciaryduty,plusanydutyandliabilitysetoutinthetermsandconditions;

both appointment of BR and actual terms and conditions need to be registered with the Securities and Exchange Commission.

• Indentureagreementsinbondissuescanspecifyatrusteeorbondholderrepresentative. This trustee oversees bondholder rights, including the filing of claims and demand payments from the issuer or guarantors. Bondholders can sue and claim for damages from the trustee in case the trustee acts in bad faith or causes damages to bondholders.

Viet Nam - • InVietNam,thereisnoofficialconceptofabondholderrepresentative,commissioned company, or trustee, yet.


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IX. Bankruptcy Procedures

Table 9. Bankruptcy Procedures

Jurisdiction Bankruptcy ProceduresPeople’s Republic of China (PRC)

According to article 7(2) of the Law of the People’s Republic of China on Enterprise Bankruptcy (Enterprise Bankruptcy Law), the creditor shall be entitled to ask the debtor to go into bankruptcy. The Enterprise Bankruptcy Law in the PRC is basic, and other relevant additional provisions exist for financial institutions, mainly focused on the debtor-creditor relationship.1.Bankruptcy provisions:In the PRC, the bankruptcy provisions mainly consist of the Enterprise Bankruptcy Law, Company Law, Securities Law, Commercial Bank Law and other relevant laws and regulations. Among them, the Enterprise Bankruptcy Law is the special law regulating bankruptcy. If an enterprise legal person cannot repay due debts and its assets are insufficient to pay off all the debt or it apparently lacks solvency, it should clean up debt according to the Enterprise Bankruptcy Law.After an enterprise is declared bankrupt in accordance with the Enterprise Bankruptcy Law, its collateral property does not belong to the estate, but constitutes repayment of its secured debt, and the remaining assets are included in the estate. 2.Settlement of the insolvent assets:Settlement of the insolvent assets are effected in the following order: (a) Expenses for bankruptcy proceedings, including: litigation cost involved in a bankruptcy case; expenses for management,

realization and distribution of the debtor’s assets; and expense involved in the administrator’s performance of these duties and paid for his remuneration and expenses for the employees recruited.

(b) Community debts, including: debts generated when the bankruptcy custodian or debtor requests the opposite party concerned to perform a contract that is not fulfilled completely by both parties concerned; debts generated from the custodial management of the debtor’s assets; debts generated from improper gains; the labor cost for the continuance of business operation, social insurance premiums, as well as other debts as incurred therefrom; debts generated from the damage that occurs during the performance of functions and duties by a bankruptcy custodian or other relevant personnel; and debts generated from any damage due to the debtor’s assets.

(c) The wages, subsidies for medical treatment and disability and comfort and compensatory funds as owed by a debtor, the fundamental old-age insurance premiums, fundamental medical insurance premiums that shall have been transferred into the employees’ personal accounts, as well as the compensation for the employees as prescribed by relevant laws and administrative regulations.

(d) The social insurance premiums other than those as prescribed in the aforesaid provisions and tax fees as defaulted by the bankruptcy.

(e) The common credits of bankruptcy. Where the insolvent assets are not enough to meet the requirements for liquidation in a same sequence, it shall be distributed in light of the proportion.

After the recent financial crisis, and based on lessons learned from the risk of the bankruptcy of large financial institutions, the PRC is developing its “Financial Institution Bankruptcy Management Regulations,” aiming to find the resolution to the problem of large financial institutions too big to fail.

“The Asia-Pacific Restructuring and Insolvency Guide 2006” explains the restructuring and insolvency frameworks of Asia-Pacific countries.

Hong Kong, China Any bond issuers going into bankruptcy are subject to the relevant rules set out in the Bankruptcy Ordinance (Chapter 6 of the Laws of Hong Kong). The ranking of a bond vis-à-vis other indebtedness of the bond issuer is determined taking into account the terms and conditions set out in the prospectus, offer documents, term sheets or similar form of documents, as well as section 38 (Priority of debts) of the Bankruptcy Ordinance. The insolvency law in Hong Kong, China is contained in the Companies Ordinance, the Bankruptcy Ordinance and the Companies (Winding-up) Rules. It is based on the law of the United Kingdom (UK), prior to the introduction of the Cork Report. Like the regimes in Australia and New Zealand––also UK-based jurisdictions––it is generally creditor friendly. Out-of-court restructuring, schemes of arrangement, compulsory liquidations, creditors’ voluntary liquidations and receiverships are available under the insolvency law. No corporate rescue procedure is currently available.

Indonesia The Indonesian Bankruptcy Law provides the legal infrastructure for bankruptcy, which can be settled either through court proceedings or informal mechanisms. Creditors may file a bankruptcy petition or submit a lawsuit to the relevant district court based on a breach of contract. During the 1997 Asian financial crisis, the government established the following informal mechanisms to facilitate negotiations between debtors and creditors: 1. The Jakarta Initiative Task Force to provide corporate debt restructuring and workout plans to both creditors and debtors. 2. The Indonesian Debt Restructuring Agency to help market-oriented corporations resolve their debt by providing them with fixed

exchange rates to strengthen the value of the rupiah. This agency’s mandate expired in 2006.3. The Indonesian Bank Restructuring Agency to facilitate bank and loan restructuring by taking over a bank’s non-performing loans

and injecting new funds to recapitalize them. Provisions for insolvency are also included in the Capital Market and Financial Institution Supervisory Board (Bapepam-LK) Rulebook.


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Jurisdiction Bankruptcy ProceduresJapan There are four statutory insolvency proceedings that apply to Japanese corporations. Each can be categorized into one of two general

types, depending on whether the aim of the proceedings is to liquidate the company (“Liquidation-type Proceedings”) or rehabilitate the company (“Rehabilitation-type Proceedings”):1. Liquidation-type Proceeding

a. Bankruptcy proceedings (hasan) under the Bankruptcy Act; andb. Special liquidation proceedings (tokubetsu seisan) under the Companies Act.

2. Rehabilitation-type Proceedingsa. Corporate reorganization proceedings (kaisha kosei) under the Corporate Reorganization Act; andb. Civil rehabilitation proceedings (minji saisei) under the Civil Rehabilitation Act.

At the time of the filing of the application for or the commencement of any of those insolvency proceedings or both, depending on the language of the default clause of the relevant bonds, the bonds will be accelerated. If a commissioned company for bondholders has been appointed for the bonds, the commissioned company will act for the benefit of the bondholders as creditors of the issuer in the proceedings. If no commissioned company has been appointed, individual bondholders will be expected to act for themselves in the proceedings.As an alternative to commencing one of the four types of statutory insolvency proceedings above, a Japanese corporation in financial distress may seek to negotiate an out-of-court restructuring of the corporation with its creditors. In the course of such negotiation, bondholders’ meeting may determine the amendment to the terms and conditions of the bonds, such as installment repayment of principal amount or reduction of the interest rate, though a court approval will be required to have the decision of the meeting take effect. The resolution requirement for an agenda depends on the content of the agenda. This statutory bondholders’ meeting system set out in the Companies Act is applicable only to the bonds issued by Japanese corporate issuers under Japanese law.

Republic of Korea Corporate Restructuring Promotion Act (authority concerned: Financial Services Commission): The purpose of this Act is to facilitate constant corporate restructuring through market functions by providing for matters required in promoting an expedited and smooth corporate restructuring.

Debtor Rehabilitation and Bankruptcy Act (authority concerned; Ministry of Justice): The purpose of this Act is to efficiently rehabilitate debtors, who are faced with livelihood collapse due to financial difficulties, and their businesses through the coordination of legal relations among interested persons, including creditors, shareholders and equity holders, etc. and to liquidate the assets of debtors who are deemed to find it difficult to rehabilitate or fairly distribute their assets.

Malaysia Malaysia’s laws on bankruptcy have been established in the Companies Act 1965, Bankruptcy Act 1967, and in their respective rules and various amendments. The Companies Act 1965 contains provisions for insolvency, rehabilitation, appointment of receivers, and winding-up procedures for companies. Specific laws governing industries may also have provisions governing insolvency of a company (e.g., the Banking and Financial Institutions Act 1989 for banks). The Bankruptcy Act 1967 covers bankruptcy laws for individuals.

“The Asia-Pacific Restructuring and Insolvency Guide 2006” explains the restructuring and insolvency frameworks of Asia-Pacific countries in greater detail.

Philippines Bankruptcy procedures are governed primarily by the Financial Rehabilitation and Insolvency Act of 2010 (FRIA) and the Civil Code of the Philippines. The Supreme Court will soon issue the implementing rules of FRIA. FRIA was passed into law on 18 July 2010. The FRIA repealed the country’s 101-year old Insolvency Law (Act 1956), which was enacted in 1909. FRIA provides for three different modes of rehabilitating an insolvent corporate debtor, namely: (a) court-supervised rehabilitation, (b) pre-negotiated rehabilitation, and (c) out-of-court or informal restructuring or rehabilitation. In a court-supervised rehabilitation proceeding, the court appoints a receiver and determines which claims against the debtor are valid. A rehabilitation plan is to be agreed upon by the debtor and creditors representing more than 50% of the claims of each class of creditors. If the plan is not finalized or approved by the court, the debtor will be liquidated. During the pendency of the proceedings, all claims against the debtor are suspended, and taxes as well as fees due from the debtor to the government are deemed waived. The amount of debt reduced or forgiven will not be subject to tax. In a pre-negotiated rehabilitation, a debtor seeks court approval of a rehabilitation plan previously contracted by it with creditors representing at least 2/3 of its total liabilities (and at least 67% and 75% of its secured and unsecured obligations, respectively). Claims against the debtor are suspended while the proceedings are pending in court. In the out-of-court mode, the debtor and creditors representing at least 85% of the debtor’s total liabilities (and at least 67% and 75% of its secured and unsecured obligations, respectively) are to agree on a restructuring or rehabilitation plan. This plan becomes binding on the contracting parties, as well as on the other creditors of the debtors. During negotiations, a standstill of up to 120 days may be approved by creditors holding more than 50% of the total claims. The FRIA does not cover banks, insurance companies and pre-need companies, as these entities are governed by other laws and regulations. FRIA also provides for the liquidation of insolvent juridical debtors. Voluntary Liquidation is initiated by the debtor via a verified petition, or a verified motion in court-supervised or pre-negotiated rehabilitation proceedings. Rehabilitation proceedings may also be converted into liquidation proceedings when the rehabilitation court finds that the debtor is insolvent and there is no substantial likelihood for the debtor to be successfully rehabilitated, or when the



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Jurisdiction Bankruptcy Proceduresrehabilitation plan is not confirmed by the rehabilitation court within 1 year from filing of the petition, or when the rehabilitation proceedings is terminated due to failure of rehabilitation or dismissal of the rehabilitation petition for reasons other than technical grounds, or at any time upon the recommendation of the rehabilitation receiver that the rehabilitation of the debtor is not feasible. Involuntary Liquidation is initiated by three or more creditors whose aggregate claims amount to at least PHP1 million or at least 25% of the subscribed capital stock or partners’ contribution, whichever is higher, also via a verified petition or a verified motion in a court-supervised or pre-negotiated rehabilitation proceedings. FRIA has a special provision for the liquidation of a securities market participant. It recognizes the power of a regulatory agency or self-regulatory organization to liquidate trade-related claims of clients or customers of a securities market participant which, for purposes of investor protection, are deemed to have absolute priority over all other claims of whatever nature or kind insofar as trade-related assets are concerned. Trade-related assets include cash, securities, trading right, and other assets owned and used by the securities market participant in the ordinary course of its business. For insolvent individual debtors, the FRIA provides for (a) the suspension of payments, when the debtor possesses sufficient properties to cover all his debts but foresees the impossibility

of meeting them when they respectively fall due, (b) voluntary liquidation, initiated by the debtor who does not have sufficient properties to cover his liabilities and owes debts

exceeding PHP500 thousand, and (c) Involuntary liquidation, initiated by creditors with claims aggregating at least PHP500 thousand.

FRIA requires that the Liquidation Plan and its implementation shall ensure that the concurrence and preference of credits as enumerated in the Civil Code of the Philippines and other relevant laws shall be observed, unless a preferred creditor voluntarily waives his preferred right. Credits for services rendered by employees or laborers to the debtor shall enjoy first preference under article 2244 of the Civil Code, unless the claims constitute legal liens under articles 2241 and 2242 thereof.

“The Asia-Pacific Restructuring and Insolvency Guide 2006” provides details on the restructuring and insolvency frameworks of Asia-Pacific countries.

Singapore Singapore has a well-established, comprehensive corporate bankruptcy and insolvency statutory framework, which is largely set forth in the Companies Act. The corporate bankruptcy and insolvency laws primarily stem from English and Australian sources, and remain similar in many respects to the legislation of those jurisdictions. Singapore laws have progressively developed over the years to keep pace with developments in other jurisdictions.“The Asia-Pacific Restructuring and Insolvency Guide 2006” explains the restructuring and insolvency frameworks of Asia-Pacific countries, including information on Singapore.

Thailand According to the Bankruptcy Act B.E. 2483 (1940), corporate bondholders shall be treated as ordinate creditors. In addition, under the Securities and Exchange Act B.E. 2535 (1992) and “Trust for Transactions” in the Capital Market Act B.E. 2550 (2007), if the issuer of corporate bonds sets up a reserved account or sinking fund in a form of trust, bondholders shall have bankruptcy remoteness and ultimately shall have the rights in that trust property. When the company goes bankrupt, corporate bondholders shall have the right to the property of the company to receive performance of an obligation due to them according to the following ranks:1. Bondholders for which the issuer has set up reserve account or sinking fund in a form of trust2. Secured creditors 3. Unsecured creditorsThere is no explicit legal protection of the netting procedures as well as the settlement finality when insolvency is involved. Consequently, it cannot be ruled out that transactions settled in the Thailand Securities Depository will not be protected against a court decision in the event a participant becomes insolvent.

Viet Nam In Viet Nam, a bankruptcy of a corporate bond issuer has not occurred yet. If it happens, the Bankruptcy Law 2004 will be applied.“The Asia-Pacific Restructuring and Insolvency Guide 2006” provides details on the restructuring and insolvency frameworks of Asia-Pacific countries. According to this Guide, prior to October 2004, the legal framework for bankruptcy in Viet Nam consisted of the Law on Business Bankruptcy dated 30 December 1993, the Decree on Business Bankruptcy dated 23 December 1994, and varioussubordinatelegalinstruments(collectivelyreferredtoasthe‘oldBankruptcyLaw’).The old Bankruptcy Law was generally considered to be deficient and, by the end of the East Asian economic crisis in 2002, the courts had received only 151 petitions, with a mere 46 of these resulting in a declaration of bankruptcy. The old Bankruptcy Law was replaced by the Bankruptcy Law dated 15 June 2004, which came into effect on 15 October 2004, and the Resolution of the Judges’ Council of the Supreme People’s Court guiding the implementation of the Bankruptcy Law dated 28 April 2005 (collectively referredtoasthe‘BankruptcyLaw’).The Bankruptcy Law applies to enterprises and cooperatives established in accordance with Vietnamese law. The list of enterprises covered is extensive and includes state-owned enterprises (SOEs), enterprises belonging to social and political organizations, limited liability companies, joint stock companies, partnerships, private enterprises and foreign-invested enterprises (FIEs). The Bankruptcy Law does not apply to individuals or certain small business entities such as registered family and household businesses. The law stipulates that additional regulations will be issued to address the insolvency of enterprises in certain specific sectors, including:



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Jurisdiction Bankruptcy Procedures(i) national defense and security;(i) finance, banking and insurance; and(ii) other sectors directly providing public utility products and services.

To date, however, such detailed laws have not been issued. Voluntary liquidation and restructuring are addressed by separate legal frameworks depending on the type of enterprise. An enterprise experiencing financial difficulties may consider restructuring or terminating its operations in accordance with the relevant legislation. Chapter VII of the Law on Enterprises, which governs limited liability companies, joint stock companies, partnerships and private enterprises, deals with the dissolution and reorganization of enterprises and allows for the division, separation, consolidation, merger and conversion of enterprises. The Law on Foreign Investment governs the dissolution, division, demerger, consolidation and conversion of FIEs.Both the Law on Enterprises and the Law on Foreign Investment were replaced by a unified Law on Enterprises which was passed on 29 November 2005 and became effective on 1 July 2006, and which contains similar provisions.Chapter VII of the Law on State-Owned Enterprises deals with the reorganization and dissolution of SOEs.


X. Form of Bonds (Settlement Method) and Status (Bearer/Registered)

Table 10. Form of Bonds (Settlement Method) and Status (Bearer/Registered)

JurisdictionForm of Bonds

(Settlement Method)Status

(Bearer/Registered)


• Book-entryform Registered.(Bonds are generally getting scripless in a central register and registered in the account holder’s or bondholder’s name; some older bearer bonds may still exist.) (For China Central Depository and Clearing [CCDC]- settled bonds in the China Inter-bank Bond Market, management of the bearer-bond library was centralized by CDCC in 1998, and 2001 saw the end of bearer bonds.)

Hong Kong, China • Book-entryform(dematerialized)forExchangeFundpaper,and• Globalnoteformforcorporatebonds

Bearer/Registered

Indonesia • Book-entry(from2000)• Physicalcertificatesstillexist(issuedpriorto2000)

Bearer/Registered

Japan Book-entry form(Completely dematerialized, except for a few non-central securities depository (CSD)-settled private placed notes)

Registered

Republic of Korea • Book-entryform1. Dematerialized securities Securities which are not issued in paper form and whose

ownership is held and transferable by book entry in a ledger maintained by a CSD or account management institution.

2. Immobilized securities Physical securities and non-certificated securities held and

transferred by book entry in a ledger maintained by a CSD or account management institution.

Bearer/Registered

Malaysia • Listedbonds:BookentryatBursaMalaysiaDepository• Unlisteddebtsecurities:BookentryatBankNegaraMalaysia

Basically, registered.Cagamas papers are unsecured bearer bonds issued by Cagamas, the national mortgage corporation established in 1986 to promote the secondary mortgage market in Malaysia.



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JurisdictionForm of Bonds

(Settlement Method)Status

(Bearer/Registered)Philippines • GovernmentSecurities:BookentryinRegistryofScripless

Securities or in Philippine Depository and Trust Corporation (PDTC)

• ScriplessCorporateBonds:BookentryinPDTC• PhysicalCorporateBonds:Endorsementandactualdeliveryof

physical certificates with duly notarized Deed of Assignment

Bearer/Registered.Dematerialization/Immobilization versus Physical Securities:Both equities and debt securities are legally recognized in physical and dematerialized form. In the organized market for debt securities, however, debt securities must be in dematerialized form and cannot be listed if the same are still in physical form, even if immobilized.

Singapore • Bookentryforgovernmentbonds• TheCentralDepositoryPte.holdsuniversalcertificatesfor

physical bonds

Bearer/Registered.A foreign issuer is normally required to appoint a paying agent in Singapore while the debt securities are quoted on the Exchange and upon the issue of debt securities in definitive form. The Exchange may accept other arrangements to enable definitive certificate holders of the bearer debt securities in Singapore to be paid promptly.

Thailand • Bookentry• Promissorynotes(PNs)andcommercialpapersarephysical,

bearer instruments.In accordance with sections 225 to 228 of the Securities and Exchange Act (SEA), immobilization in the Thailand Securities Depository (TSD) system has been arranged through the transfer of securities by book entry. The transfer of securities by book entry shall be deemed to be the delivery of securities, which constitutes the legal basis for the validity of securities transfer under section 199 and section 51 of the SEA. Moreover, securities transferred into the name of the TSD shall be presumed to be securities held by the TSD on behalf of its members or for any customers of its members.However, there is no explicit legislation for the dematerialization of securities.

Bearer/Registered.PNs are physical, bearer instruments issued by banks and other financial institutions.

Viet Nam • Bookentry• Municipalbondsarephysical,bearerinstruments.• Corporatebondsandstate-ownedenterprisesbondscanbe

held in bearer or registered form.• ListedcorporatebondshavetobedepositedattheVietnam

Securities Depository to be eligible for trading on the Exchanges

Bearer/Registered

Source ADB Consultants, based on research materials and market visit information.

XI. Exchangeability of Scripless Bonds to Physical Bonds

Table 11. Exchangeability of Scripless Bonds to Physical Bonds

Jurisdiction Exchangeability of Scripless Bonds to Physical BondsPeople’s Republic of China No


Indonesia Yes

Japan No


Malaysia Yes

Philippines Yes

Singapore Yes

Thailand Yes

Viet Nam YesSource ADB Consultants, based on research materials and market visit information.


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XII. Transfer of Securities (or Property Rights) and Finality of Settlement of Scripless Bonds

Table 12. Transfer of Securities (or Property Rights) and Finality of Settlement of Scripless Bonds

Jurisdiction Transfer of Securities (or Property Rights) Finality of SettlementPeople’s Republic of China (PRC)

Transfer of Entitlement and Ownership of Securities1. First, according to the “Securities Law of PRC revised in 2005: Article 157,” a securities registration and clearing institution (such as China Securities Depository and Clearing Corporation [CSDCC], China Central Depository and Clearing [CCDC] or Shanghai Clearing House) shall perform the following functions:

a. The establishment of securities accounts and settlement accounts;b. The custody and transfer of securities;c. The registration of roster of securities holders;d. The settlement and delivery for listed securities trading of a stock exchange;e. The distribution of securities rights and interests on the basis of the entrustment of

issuers;f. The handling of any inquiry relating to the aforesaid business operation; andg. Any other business operation as approved by the securities regulatory authority under

the State Council.2. Second, a securities registration and clearing institution (such as CSDCC or CCDC) takes the following measures to guarantee a sound operation of its business:A securities registration and clearing institution’s (such as CSDCC/CCDC) rules are formulated to regulate securities depository and clearing activities, protect the rights and interests of investors, maintain the order of the depository and clearing activities, mitigate securities depository and clearing risks, and promote an efficient securities market in accordance with the Securities Law of the People’s Republic of China, Company Law of the People’s Republic of China and other applicable laws and regulations.3. Security Account Management SystemSecurities shall be credited to the beneficiary’s account, unless otherwise provided by applicable laws, regulations and requirements of the China Securities Regulatory Commission that securities will be credited to the nominal holder’s account.The investor shall apply with the CSDCC or CCDC for establishing the securities account for recording the balance and changes of securities held by the investor with reliable, accurate and complete account opening information. The CSDCC or CCDC may establish the securities account directly or designate a qualified securities company as the account-opening agent. 4. Securities Registration SystemNew securities are typically issued in electronic form.The securities issuer shall make the initial public offer holder register and other relevant materials available for the CSDCC or CCDC to establish the original holder register of such securities. The issuer is responsible to guarantee the legality, authenticity, accuracy and integrity of materials it provides to the CSDCC or CCDC. The CSDCC shall maintain the holder register of a listed security according to the settlement records of securities transactions. In case of securities transfer in the nature of negotiated or forced transfer, heritage, donation and government transfer, etc., the CSDCC or CCDC shall process changes in the balance in securities accounts and the shareholder register in line with the operating rules.5. Central Depository SystemTo participate in securities investment, the investor shall enter into a securities brokerage, custody and clearing agreement with the securities company. The CSDCC or CCDC shall prescribe and disseminate the mandatory provisions in relation to the securities depositary and clearing service in the securities brokerage, custody and clearing agreement, which shall include, but not limited to: a. The Securities Company shall place the trading instructions upon client’s entrustment,

execute settlement of each valid transaction and take corresponding settlement responsibility in line with the securities trading rules; the securities transfer between the securities company’s securities settlement account and its client’s account shall be executed by the CSDCC or CCDC commissioned by the securities company after the market close.

b. The investor and a securities company involved in a collateralized repurchase agreement shall provide the required pledged securities to the CSDCC or CCDC in accordance with the operating rules; the liabilities between the investor and the securities company will not prejudice the CSDCC’s or CCDC’s pledge rights on the pledged securities.

Bonds are transferred on T, cash on T+1.

Finality of trade is not so much the issue in the PRC bond market as the actual transfer of the entitlement takes place in the form of the owner registration, according to the Chinese legal concept underlying all legislation; hence, finality of trade is not an important concept, like in mature markets.

Final and irrevocable on T+1.


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Jurisdiction Transfer of Securities (or Property Rights) Finality of Settlementc. The securities company shall process the transfer of securities custody to another securities

company upon the client’s request, in line with relevant operating rules of the stock exchange and the CSDCC or National Association of Financial Market Institutional Investors and CCDC. (Compared to other ASEAN+3 markets, a professional custody/intermediary system is only now evolving in PRC.)

Hong Kong, China Transfers of interests in bonds:Both Bank for International Settlement (BIS) Model 1 (gross-gross) and BIS Model 3 (net-net). Transfer of title can be evidenced through registration.1. Transferees and transferors should send transfer instructions to the CMU for matching and

settlement. The transfer of ownership becomes effective upon matching a debit instruction with the corresponding credit instruction and registration in the book entries in the securities accounts of CMU Members within the CMU Service.

2. Entitlement perfection against the third party and Finality of transactionsa. Real-time securities transfer transactions on the CMU Members’ Terminal or

SWIFT16 are immediately completed upon successful debiting of funds from the buyer and debiting of securities from the seller, and are deemed final (not subject to waiting time).

b. End-of-day securities transfer transactions are balanced during CMU end-of-day settlement processing.

c. Notwithstanding the mode/means of transfer, all local securities transfer instructions affected through the CMU Service shall be settled by the Hong Kong Monetary Authority debiting or crediting the relevant securities accounts of the CMU Members concerned, and once debited or credited to such securities accounts; such securities transfer instructions shall be deemed made, completed, irrevocable and final.

d. The situation can be more complex where the securities transfer instructions are effected through linkages with other regional central securities depositories (CSDs) including the Korea Securities Depository, AustraClear, and China Central Depository and Clearing (CCDC), or with international CSDs (ICSDs), including Clearstream or Euroclear.

e. It is also worth noting that the finality of the transactions settled through the CMU system is protected from insolvency laws (including liquidators and receivers) under section 19 of the CSSO (Cap 584). For example, the securities transactions, once settled, may not be set aside on grounds of unfair preference.

f. Prohibited transfersi. On-Exchange naked short selling of listed securities is prohibited in Hong Kong,

and all CMU Members must undertake not to incur a short position in any of the CMU Instruments. Securities may only be sold at or through a recognized stock market if the seller (as principal) or his principal (himself as agent) has, or has reasonable grounds for believing that he or the principal has, a presently exercisable and unconditional right to vest the securities in the purchaser (section 170 of the Securities and Futures Ordinance [SFO]).

ii. The concept of “presently exercisable and unconditional right to vest the securities in the purchaser” is interpreted with some flexibility

iii. On-Exchange covered short sales (i.e., short selling orders) in “designated securities” (as designated by the HKSE pursuant to the Short Selling Regulations in the Eleventh Schedule to the Listing Rules) are permitted provided that: 1 the seller (whether acting as principal or agent) must, at the time of

placing a short selling order, identify it as a short selling order and provide documentary assurance that the sale is “covered” and

2 an intermediary who receives a short selling order must ensure that he has obtained a documentary assurance that the sale is “covered’.

iv. The maximum penalties for contravention of section 170 of the SFO are a fine of HKD100,000 and imprisonment for 2 years.

v. The Hong Kong Securities Clearing Company Limited charges a default fee of 0.50% of the market value of failed transactions.

For bonds settled on CMU, final and irrevocable upon settlement (Clearing and Settlement Systems Ordinance [CSSO]).

For bonds settled in the Central Clearing and Settlement System, final and irrevocable upon settlement.

Indonesia In general, the transfer of entitlement and ownership of scripless securities are considered completed if the related transaction status is reflected as “Settled” in the Central Securities Depository’s (CSD) system. In case of receipt transaction, the holding status of the scripless securities in the securities account maintained in the CSD is reflected as “Available”. The third-

The exchange of cash and securities is final when a settlement can no longer be unwound.



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Jurisdiction Transfer of Securities (or Property Rights) Finality of Settlementparty entitlement will be ensured by showing the holding position in the accounts maintained with the CSD or in the holding confirmation issued by CSD.a. Indonesian Central Securities Depository (KSEI) for Scripless, Debt Securities and Sukuk For scripless shares, debt securities and Sukuk, KSEI maintains the records of investors’ assets in an electronic book-entry system, as a domestic CSD.Securities transferred to the depository system are automatically registered without any additional documentation. In the books of the issuers, the securities remain registered in the names of the account holders maintained in the depository. The issuers receive regular update on the bondholders’ list from KSEI for their scripless securities while maintaining the administration of physical securities, which are registered under the name of the securities holders.b. Bank Indonesia (BI) for Scripless Government Bonds and Certificate of Bank Indonesia

(SBI)BI, as the central registry for government bonds and SBI, maintains an electronic registration of the sub-registry’s positions; each sub-registry in turn maintains the account details of each beneficial owner. SBI is normally settled on T+1. For government bonds, the settlement cycle in the secondary market is T+2 or as agreed between parties involved. Settlement of government bonds and SBI is through Bank Indonesia- Scripless Securities Settlement System, a system to facilitate online settlement transactions between the sub-registries.

The finality of settlement is stipulated in Exchange Rule No. II.F.3.5.Final and irrevocable on T+3.

Finality eliminates the main legal risks of payment and settlement systems, reduces systemic risk, and ensures the smooth operation of a system.

Japan Japanese Government Bonds at the Bank of Japan and corporate bonds at the Japan Securities Depository Center (JASDEC) adopt BIS Model 1 Delivery versus Payment (DVP) (gross-gross):BIS Model 1––Systems that settle transfer instructions for both securities and funds on a trade-by-trade (gross) basis, with final (unconditional) transfer of securities from the seller to the buyer (delivery) occurring at the same time as final transfer of funds from the buyer to the seller (payment). Legal Definition of Debt Instruments:1. Uniform Legal Framework for All Types of Securitiesa. The Law Concerning Book-Entry Transfer of Corporate Bonds, Stocks, and Other Securities

provides the legal basis for the book-entry transfer system and dematerialization of all securities.

b. JASDEC performs the role of the CSD in the book-entry transfer system in securities other than government bonds. In this law, the term CSD means “Designated Book-Entry Transfer Institution.” Participants in the book-entry transfer systems must observe the rules established by the book-entry transfer institution.

2. Dematerialization versus Physical Certificatesa. As described above, according to this law and the above system for securities to be

distributed, it has realized the complete dematerialization. b. The Companies Act allows the form of physical bond certificates to be issued regardless of

the book-entry transfer method. However, in this case distribution in the market cannot be expected, and it is also not allowed to be owned in tax-exempt status under the Japanese taxation system.

3. Legal Ownership Structure of Dematerialized or Immobilized Securitiesa. In the book-entry transfer institutions, securities companies and financial institutions, etc.

as “Account Management Institution” may open an account for securities transfer.b. In the transfer account, the balance of their own account and the overall customer

account are recorded respectively. c. Bondholders open the transfer account with the book-entry transfer institution or account

management institution. By performing an electronic transfer to an account transfer record, the securities are entitled to be owned by the bondholder.

d. Bondholders have the property rights (or legal position) against third parties and the issuers by records in their account.

e. Should there be an insufficient transfer-account book records in the customer’s account due to the over-recording, the “duty of retirement of over-recording” is generated by account management institutions. (In the event of insufficient balance in a customer account due to over-delivery, the account management institution is required to rectify the records.)

Final and irrevocable upon the recording in accounts on the books of relevant parties.



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Jurisdiction Transfer of Securities (or Property Rights) Finality of SettlementRepublic of Korea Over the Counter: BIS Model 1 (gross-gross).

Exchange:- Government Bonds: modified BIS Model 1a- Others: BIS Model 3 (net-net)

Ownership Transfer Mechanism1. Dematerialized securities: Delivered by book entry across the accounts of the transferor and transferee opened at the CSD or account management institution.2. Immobilized securities: Same as dematerialized securitiesb

Securities deposit is a process through which rights over securities are transferred, altered, and nullified by book entry without the actual movement of physical certificates. To benefit from the securities deposit system, participants such as brokers or institutional investors have to open participant accounts at the CSDs and deposit their securities at the CSDs. In Republic of Korea, the Korea Securities Depository (KSD) is the single CSD and provides securities deposit service.The securities deposit system consists of KSD as an operator, participants and their customers as users, and deposit-eligible securities as objects. Securities holdings of participants are held in custody on a fungible basis at KSD and are settled on a book-entry basis by recording debit-credit on the account book, a legal ledger kept by KSD and its participants.

Final and irrevocable upon transfer, except counterparty’s agreement.No exceptions for the Exchange-traded market settlement.Settlement data are transferred from Korea Exchange to KSD directly through network clearing facilities for exchange market.

Malaysia In Malaysia, nearly all securities are scripless, with securities transferred electronically via Bank Negara Malaysia’s Real-Time Electronic Transfer of Funds and Securities system, which is operated by its wholly-owned subsidiary, Malaysian Electronic Clearing Corporation (MyClear). Transfer instructions are conducted on a trade-by-trade basis.Listed bonds: BIS Model 2: Systems that settle securities transfer instructions on a gross basis, with final transfer of securities from the seller to the buyer (delivery) occurring throughout the processing cycle, but settle funds transfer on a net basis, with final transfer of funds from the buyer to the seller (payment) occurring at the end of the processing cycle.Unlisted debt securities: BIS Model 1: Systems that settle transfer instructions for both securities and funds on a trade-by-trade (gross) basis, with final (unconditional) transfer of securities from the seller to the buyer (delivery) occurring at the same time as final transfer of funds from the buyer to the seller (payment).

Finality of settlement is achieved once the book-entry transaction is shown in a settled status.

Philippines BIS Model 1 (gross-gross) for government securities and for scripless corporate bonds. Unlisted corporate bonds – subject to mutual agreement.Securities in the organized market are transferred in book entry form. All trade settlements occurring through the Philippine Dealing and Exchange organized market are done on a gross, trade-for-trade basis.

Final and irrevocable upon settlement at the Registry of Scripless Securities and/or Philippine Depository and Trust Corporation.Final and irrevocable upon issuance of physical certificates in favor of new owner.

Singapore BIS Model 2 (gross - gross) - Systems that settle securities transfer instructions on a gross basis, with final transfer of securities from the seller to the buyer (delivery) occurring throughout the processing cycle, but settle funds transfer on a net basis, with final transfer of funds from the buyer to the seller (payment) occurring at the end of the processing cycle.

Only for settlement date trades settling via depository’s enhanced DVP system.

Government Securities: Final upon transfer of funds and securities on settlement date.

Thailand Thailand Securities Depository (TSD) provides BIS Model 1 and Model 3.TSD assumes the role of central counterparty (CCP) for multilateral netting procedure that takes place before the settlement is executed. This netting arrangement is enforceable under sections 341 to 348 of the Civil and Commercial Code and section 102 of the Bankruptcy Act B.E. 2483 (1940).However, since section 102 of the Bankruptcy Act allows netting of obligations only if the cause of indebtedness incurred before the date of the receivership order, the TSD may not net its obligations against the obligations of the insolvent participant which arise on that date.

Securities: upon settlement of a transfer made through TSD or Bank of Thailand Automated High Value Transfer Network.

Finality of settlement:TSD rule clearly states the timing of finality and the way finality is achieved. The transfer of funds is enforced by Bank of Thailand regulations.



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Jurisdiction Transfer of Securities (or Property Rights) Finality of SettlementHowever, there is no explicit legal protection for settlement finality. It can be challenged by a court decision. In accordance with section 115 of the Bankruptcy Act, the court is empowered to reverse the debtor’s transfer of assets during the three months prior to an application to adjudicate him as bankrupt and thereafter if the court finds that the debtor transfers such assets with the intention to give undue preference to a creditor, and if the official receiver is able to prove that the transfer has been made by the debtor with the intention to cause other creditors a disadvantage. Thus, if the court orders the receivership of a clearing house member or a settlement bank, the court may cancel the transfer of funds and securities made during that period.

Viet Nam BIS Model 3 (net-net); DVP conducted simultaneously by the Vietnam Securities Depository (VSD) for securities delivery, and BIDV for cash settlement.Listed bonds: entry in the VSD.Unlisted bonds: depends upon charter and terms and conditions of the bonds, but normally the bond certificates are entered into the bond register of the issuer.Transfer of securities ownership: article 54 of Securities Law No. 70/2006/QH11: 1. The transfer of securities ownership with respect to categories of securities registered at the

Securities Depository Centre shall be undertaken via VSD; 2. The validity of the transfer of securities ownership at VSD shall be as follows: a. Where securities have been centrally deposited at VSD, the transfer of securities ownership

shall take effect on the date of book entry in the securities depository account at VSD. b. Where the securities have not been centrally deposited at VSD, the transfer of securities

ownership shall take effect on the date of recording on the securities registration book managed by VSD.

According to article 4 of Circular 43 /2010/TT-BTC dated 25 March 2010 amending Decision 87/2007/QD-BTC, the transfer of ownership of listed or registered for trading securities shall be subject to the following principles: Any securities holder intends to transfer his ownership of securities shall deposit such securities at VSD via depository members to buy or sell such securities via Stock Exchanges or transfer his ownership as prescribed in Clause b of this Article (except for any transfer of ownership due to inheritance factors or the fact that the issuer redeems it shares from employees upon employment termination). -VSD shall only execute transfers of ownership of securities outside its securities trading system if such transfers are non-commercial or fail to be executed via trading systems at Stock Exchanges. Such transfers shall include the following cases: + Making as a present, inheriting according to the Civil Law+ Odd-lot transactions according to the law of securities and securities market. + Issuers/labor unions of issuer buyback preferred shares of their employee which terminate their labor contracts to become treasury shares and bonus shares for their current employee.+ Issuers use treasury shares to bonus/labor union of issuer distribute bonus shares for their employee.+ Foundation shareholder transactions in restricted time.+ Issuers change their strategic shareholders in restricted time.+ In case if securities have registered in VSD and have accepted in principal by Exchanges but have not listed on Exchanges yet.

3:00 p.m. on Settlement Date is assumed as effective settlement time for both cash and securities.



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Jurisdiction Transfer of Securities (or Property Rights) Finality of Settlement+ Investors leave securities in trust for fund manager in case fund manager accepts to manage trusted investment portfolio by assets.Different from equity, there is no general meeting for bond holders. Bond is debt instrument so that the rights of bond holder are stipulated according to Decree 01/2011/ND-CP:+ Bondholder are guaranteed for in-time and sufficient settlement of interest and principal.+ Bondholder has entitlement to transfer, give, make as a present, inherit, discount, and pledge in credit relationship and civil relationship according to current law.As for guarantee for bond settlement,+ As for corporate bond which guaranteed by government (according to Decree 01/2011/ND-CP): the government commits to protect bondholders’ interests.+ As for guaranteed corporate bonds (according to Clause 44 of Decree 52/2006/NDCP): if the issuer fails in interest and principal settlement, the guaranteed asset will be liquidated to refund the due debt. In case other credit organizations act as settlement guarantor, they have responsibilities to refund the debt to bondholder.Currently, there is no specified company system to guarantee for corporate bond settlement in Viet Nam.

a Modified BIS Model 1: Netting bonds per issue and netting payments per issue.b 1) The account structure of dematerialized and immobilized securities is explained based on the two-tier account structure. 2) The form of ownership for dematerialized securities

cites the common view in the academia of Japan, and the form of ownership for immobilized securities is explained in terms of the Korean deposit and settlement system.Source: ADB Consultants, based on research materials and market visit information

XIII. Legal Basis and Definition of “Settlement and Clearing”

Table 13. Legal Basis and Definition of “Settlement and Clearing”

JurisdictionForm of the Bonds(Settlement Method) Definition of “Settlement and Clearing”


• Bookentry After a trade has been matched by a trading system, it needs to be cleared and settled so that the seller gets paid and the buyer gets ownership of the security traded.1. ClearingClearing involves all steps in post-trade processes apart from the final settlement, i.e., apart from the final payment and change in ownership. 2. SettlementSettlement is the last step in the post-trade process.Settlement may be:

a. Net: obligations between participants are set-off against each other, or, b. Gross: each transaction is settled individually, and may be: real-time: transactions are

settled as and when trades are agreed with no delay, or occur at regular intervals, usually on a rolling schedule at a specific time, or at the end of a day’, since the China Securities Depository and Clearing Corporation sets a specific time within the business day (when cash payments are to be effected by).

Hong Kong, China • Book-entryform(dematerialized) for Exchange Fund papers, and

• Globalnoteformforcorporate bonds

The clearing and settlement system in the Clearing and Settlement System Ordinance means a system established for: (a) the clearing or settlement of payment obligations; or(b) the clearing or settlement of obligations for the transfer of book-entry securities, or the transfer of

such securities

Indonesia • Bookentry(from2000)• Physicalcertificatestill

exists (issued prior to 2000)

• ThedefinitionofclearinginBapepam-LKregulationNo.III.A.10onsecuritiestransactionsisasfollows:

“Clearing is a process of determining the rights and obligations that arise from Exchange transactions.”

While the definition of settlement as referred in the Indonesian Central Securities Depository regulation on central depository services (chapter 8), “Securities transaction settlement services are part of Central Depository services provided for the fulfillment of rights and obligations as the results of Stock Exchange Transactions or Over-the-Counter Transactions conducted by means of book-entry of Securities and/or funds between Securities accounts.”



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Japan • Bookentry(Dematerialized)

A securities clearing and settlement system is defined as follows: 1. A Book-Entry Transfer Institution as defined by article 2, paragraph 2 of the Act on Transfer of Bonds, Shares, etc., 2. A Financial Instruments Clearing Institution as defined by article 2, paragraph 29 of the Financial Instruments and Exchange Act, or the so-called central counterparty (CCP) clearing agency.The Japan Government Bond Clearing Corporation is operating in the Japanese government bond market. On the other hand, the clearing institution for corporate bonds does not exist in Japan.

Republic of Korea • Bookentry “Clearing” is a series of processes that a CCP performs to guarantee the settlement by netting the credits and liabilities between the sellers and the buyers and to instruct the settlement agency to settle.“Settlement” is the completion of a transaction, wherein the seller transfers securities or financial instruments to the buyer, and the buyer transfers money to the seller. It is classified into delivery versus payment (DVP) and free of payment (FOP) depending on connection or separation of delivery and payment.The Korea Exchange provides clearing services as a CCP for the stock market and also provides clearing and settlement services for the derivatives market. Meanwhile, the Korea Securities Depository provides settlement services for stock market and provides clearing services as well as settlement services for the over-the-counter market.

Malaysia • Listedbonds:Bookentry at Bursa Malaysia Depository

• Unlisteddebtsecurities: Book entry at Bank Negara Malaysia (BNM)

Definition of Clearing and Settlement:1. Clearing(a) “Clearing” means the process of exchanging and reconciling payment items that result in the

establishment of final positions for Settlement. (b) “Clearing facilities” mean a facility for the clearing or settlement of transactions in securities traded

on a stock exchange or futures contracts traded on a futures market; a facility for the guarantee of settlement of transactions; or such other clearing or settlement facility or class of clearing or settlement facilities as the Commission with the approval of the Minister may allow.

(c) “Clearing house” means a person whose activities or objects include the provision of clearing facilities.

(d) The clearing house is the Bursa Malaysia Securities Clearing. 2. SettlementBased on provisions in the Capital Market and Services Act 2007, settlement, in relation to a market contract, means the discharge of the rights and liabilities of the parties to the market contract whether by performance, compromise or otherwise; and includes partial settlement effected in accordance with the rules of an approved clearing house.(a) All securities trades are generally settled based on a DVP basis. For all government securities and

scripless corporate debt securities, ownership and transfers are reflected as book entries in the custody accounts with BNM in Real Time Electronic Transfer of Funds and Securities (RENTAS).

(b) The settlement of the primary and secondary market transactions in government securities and unlisted corporate debt securities take place through the Scripless Securities Trading System, which is part of the RENTAS system.

(c) US dollar-denominated debt securities and Sukuk will be settled in RENTAS on a DVP basis while those denominated in other foreign currencies may be settled on a non-DVP basis.

(d) Scripless securities, including Malaysian government securities and selected debt securities and Sukuk, can also be settled internationally via major global custodian banks and international central securities depositories, such as Euroclear and Clearstream.

Philippines • GovernmentSecurities:Book entry in the Registry of Scripless Securities or in the Philippine Depository and Trust Corporation (PDTC)

• ScriplessCorporateBonds: Book entry in PDTC

• Republic Act No. 87 99 or the Securities Regulation CodeChapter I, Title and Definitions, SEC. 3. Definition of Terms. “Clearing Agency” is any person who acts as intermediary in making deliveries upon payment to effect settlement in securities transactions.

• RevisedImplementingRulesandRegulationsoftheSecurities Regulation Code Rule 3 Definition of Terms

C. Clearing agency is any entity that provides a facility to a broker dealer, salesman, or associated person of a broker dealer or another clearing agency for the performance of any of the following activities:



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• PhysicalCorporateBonds: Endorsement and actual delivery of physical certificates with duly notarized Deed of Assignment

(i) make deliveries in connection with transactions in securities;(ii) reduce the number of settlements of securities transactions or allocate settlement responsibilities

in accordance with the rules issued by the Commission or the Exchange; and(iii) provide the means for the central handling of securities so that transfers, loans, pledges and

similar transactions can be made by bookkeeping entry; or otherwise facilitate the settlement of securities transactions without physical delivery of securities certificates.

Singapore • Book-entryforgovernment bonds

• CentralDepository(Pte.) holds universal or global certificates for immobilized bonds

Securities and Futures Act (SFA) introduces a definition for “clearing or settlement,” which covers any of the activities comprising post-trade matching and confirmation, clearance and settlement.• SFAPartIII:ClearingFacilitiesObjectives of this Part 47. The objectives of this Part are —(a) to promote the safety and efficiency of clearing facilities that support systemically important markets or form an integral part of the financial infrastructure; and (b) to reduce systemic risk.

Interpretation of this Part 48. (1) In this Part, unless the context otherwise requires — “settlement” in relation to a market contract, includes partial settlement.“market contract” means — (a) a contract subject to the business rules of a designated clearing house that is entered into between the designated clearing house and a participant pursuant to a novation (however described), whether before or after default proceedings have commenced, which is in accordance with those business rules and for the purposes of the clearing or settlement of transactions using the clearing facility of the designated clearing house; or(b) a transaction which is being cleared or settled using the clearing facility of a designated clearing house and in accordance with the business rules of the designated clearing house, whether or not a novation referred to in paragraph (a) is to take place.General obligations 59. (1) A designated clearing house shall (a) as far as is reasonably practicable, operate a safe and efficient clearing facility;(b) manage any risks associated with its business and operations prudently;(c) in discharging its obligations under this Act, not act contrary to the interests of the public, having particular regard to the interests of the investing public;(d) ensure that access for participation in its clearing facility is subject to criteria that are fair and objective, and that are designed to ensure the safe and efficient functioning of its facility and to protect the interests of the investing public;(e) maintain business rules that make satisfactory provision for

(i) the clearing facility to be operated in a safe and efficient manner; and(ii) the proper regulation and supervision of its members;

(f) enforce compliance by its members with its business rules;(g) have sufficient financial, human and system resources —

(i) to operate a safe and efficient clearing facility;(ii) to meet contingencies or disasters; and(iii) to provide adequate security arrangements; and

(h) ensure that it appoints or employs fit and proper persons as its chairman, chief executive officer, directors and key management officers.

Thailand • Bookentry According to the Thailand Clearing House Rules and Regulations, “securities clearing and settlement” mean the payment, acceptance of payment, delivery, and taking delivery of, securities. According to Detailed Assessment of Observance of Thailand Securities Depositories of the Committee of Payment and Settlement Systems -International Organization of Securities Commission Recommendations for Securities Settlement Systems in April 2008: 1. Legal basis of the clearing and settlementThe securities clearing and settlement activities in Thailand are governed and regulated by specifically issued laws and regulations and by provisions in other legislations and regulations. The main laws and regulations are:a. The Civil and Commercial Code: (e.g., provisions governing juristic acts, obligations, contracts);b. The Securities and Exchange Act B.E. 2535 (1992) (SEA) (sections 50–55,199, 224–228);c. The Public Limited Company Act B.E. 2535 (1992);d. The notifications, rules, and regulations issued by the Stock Exchange of Thailand, and the Thailand Securities Depository (TSD);



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e. The agreement between members and the TSD as a central securities depository and a clearinghouse;f. Bank of Thailand Automated High Value Transfer Network Rules and Regulations B.E. 2549 (2006); and g. The Bankruptcy Act B.E. 2483 (1940).

Viet Nam • Bookentry 1. Securities ClearingAccording to Item 7 and Item 8 of article 2 - Decision No. 87/2007/QDBTC on registration, depository, clearing and settlement of securities, securities’ clearing includes bilateral clearing and multilateral clearing.- Bilateral clearing means the method of clearing securities transactions which have been matched during the same day between any two trading parties with respect to the one type of securities, in order to determine the net sum and securities which must be settled by both parties.- Multilateral clearing means the method of clearing securities transactions which have been matched during the same day between all trading parties with respect to the one type of securities, in order to determine the net sum and securities which must be settled by both parties.The Vietnam Securities Depository (VSD) clears settlement obligations (the receivables and the payables) towards transactions of listed stocks, fund certificates, corporate bonds having the same payment time and manner at two Stock Exchanges with a view to calculating settlement obligations to receive or to pay through each depository member2. Securities SettlementAccording to article 32 of Decision No. 87/2007/QD-BTC, VSD settles securities based on bilateral and multilateral clearing results, and then settles each transaction of listed and unlisted securities. Securities delivery is made by VSD, cash payment is made by the settlement bank, and the DVP principle is to be observed. Article 3 of VSD guideline on securities clearing and settlement: VSD shall clear securities, funds and settle securities transactions in accordance with the principles prescribed in articles 32 and 33 of the “Guidelines on Securities Registration, Depository, Clearing and Settlement” issued with Decision No. 8712007/QDBTC dated 22 October 2007 by the Minister of Finance and article 11 of Circular No. 43/2010/TT-BTC dated 25 March 2010 by the Minister of Finance on amending and supplementing the Guidelines on Securities Registration, Depository, Clearing and Settlement issued with Decision No. 87/2007/QD-BTC dated October 22, 2007 by the Minister of Finance.


XIV. Registration and Issuing Approval Procedures of Bonds

Table 14. Registration and Issuing Approval Procedures of Bonds

Jurisdiction Registration and Issuing Approval ProcedurePeople’s Republic of China (PRC)

MarketInter-bank Bond Market (Over the Counter, OTC)

Commercial bank counter market (OTC)

Exchange bond market (Shanghai Stock Exchange and Shenzhen Stock Exchange)

MAIN REGULATOR People’s Bank of China (PBOC)

PBOC China Securities Regulatory Commission (CSRC)

There is no universal approval procedure for bond issues in PRC. For different types of bonds, there are different issue examination and approval authorities (some bonds go through registration and recording system).

Bond classes Issue examining and approval authority Related regulationsTreasury Bonds National People’s Congress Standing

Committee (balance control)Law of the People’s Republic of China on Supervision by the Standing Committees of the People’s Congresses at all Levels

Regulations of the Treasury Bills of the People’s Republic of China



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Jurisdiction Registration and Issuing Approval Procedure

Bond classes Issue examining and approval authority Related regulationsCentral Bank Bills PBOC Law of the People’s Republic of China on the

People’s Bank of ChinaPolicy Financial Bonds (Policy Bank Bonds)

PBOC,China Banking Regulatory Commission (CBRC)

Administrative Rules for the Issuance of Financial Bonds in the National Inter-bank Bond Market

“Several Issues Regarding the Issuance of Hybrid Capital Notes by Commercial Banks”“Notice on the Issuance of Financial Bonds by Financial Leasing Companies and Auto Financing Companies”The Rules on the Issuance of Subordinated Bonds By Commercial Banks

Commercial Bank BondsSpecial Financial BondsNon-bank Financial Institution Bonds

Securities Company Bonds CSRC Interim Measures for the Administration of Bonds of Securities Companies

Securities Company Commercial Paper

PBOC,CSRC

Securities Company Short-term Financing Notes Regulations

Enterprise BondsState-Owned Enterprises Bonds

National Development and Reform Commission (NDRC)

Enterprise Bond Management Ordinance

“On March 19, 2007 Notice of problems related to the first corporate bond issue size and examination approval in 2007”

Commercial Paper, Medium-term Notes

PBOC authorized the National Association of Financial Market Institutional Investors to manage registration

“On January 2, 2008 promotion of the development of corporate bond market and simplification of procedures of issue examination”

Measures on the Administration of Non-Financial Corporate Debt-Financing Instruments at the inter-bank Bond Market”

“Inter-bank Bond Market, non-financial corporate debt financing instruments disclosure rules”

Asset-backed Securities CBRC, PBOC

“Administration of Pilot Projects for Securitization of Credit Assets Procedures”

Listed Corporate Bonds CSRC Interim Regulations on Administration of Corporate Bonds

International Agency Bonds PBOC,Ministry of Finance,NDRC,CSRC

Provisional Administrative Rules on International Development Institutions’ Issuance of RMB Bonds

Convertible Bonds CSRC Interim Measures for the Administration of Convertible Bonds

“Issue of Convertible Bonds By Listed Companies Implementing Procedures”

Issuer in the Inter-bank Bond Market

PBOC “National Inter-bank Bond Market trading circulation audit rules”

Hong Kong, China Regulations and rules on issuing debt instruments:1. For bonds to be listed on the Stock Exchange of Hong Kong (SEHK), bond issuers should observe, among others, the

Listing Rules which set out the qualifications for listing, application procedures and requirements, listing documents and arrangements etc.

2. Issuers of bonds to be listed on the SEHK should also observe the Trading Rules promulgated by the Hong Kong Exchange and Clearing should be observed.

3. For bonds to be listed on the HKSE, issuers should also observe the requirements of the Listing Rules, as well as Parts II and XII of the CO including section 44B.



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Jurisdiction Registration and Issuing Approval Procedure4. Save for the above and the specific laws mentioned above bonds issued by different types of entities, there are in general no other regulations governing the issuance of listed or non-listed bonds in Hong Kong, i.e.,

a. Both domestic and foreign entities are eligible to issue debt instruments in Hong Kong. b. Foreign entities interested in raising funds in Hong Kong should however ascertain whether it is permitted under the

law of their jurisdictions.c. If the debt instruments are to be listed on the SEHK, issuers have to comply with the requirements for reporting and

disclosure of information, etc. as set out in the Listing Rules and other relevant documents of the SEHK.

Indonesia A Registration Statement becomes effective within 45 days from the date of receipt by Bapepam-LK completely, or from the date of final amendment delivered by the issuer or requested by Bapepam-LK.There is a rule related to Sustainable Public Offering (Shelf Registration) based on Peraturan Bapepam dan LK Nomor IX.A.15: Penawaran Umum Berkelanjutan, which allows the debit security or bond (efek bersifat utang, EBU) issued to the public in several stages. An issuer has to submit a Registration Statement to provide a Sustainable Public Offering with the following requirements: Under Peraturan Bapepam dan LK Nomor IX.A.11: Penawaran Umum Efek Bersifat Utang Dalam Denominasi Mata Uang Selain Mata Uang Rupiah, the initial public offering (IPO) of EBU denominated in currencies other than rupiah has to be in accordance with Bapepam-LK rules related to IPO. Additional information shall be disclosed in the prospectus.

Japan Registration and Issuance Procedure of Public Offering Bonds and Notes:In order to make the information contained in the Securities Registration Statement (SRS) and its attachments accessible to general investors, the Financial Instruments and Exchange Act (FIEA) requires the SRS and its attachments to be filed by the issuer with the Director-General of the Kanto Local Finance Bureau or the relevant Local Finance Bureau (sometimes called “FB”), and for such filings to remain open for public inspection during a period of 5 years. In addition, the issuer must keep such documents at its head office and principal branch offices and make them available for public inspection.Once the SRS is filed with the relevant Finance Bureau, solicitation may be made; but before the securities are acquired by investors, the registration must have become effective. The registration becomes effective generally when 15 days have elapsed from and excluding the day of filing (“waiting period”). The relevant Finance Bureau may designate a shorter period or may notify the issuer that the registration will become effective immediately or will become effective on or after the day of filing if the relevant Finance Bureau concludes that the public can easily understand the contents of the filed registration documents or the information on the issuer has been widely disseminated to the public. In many cases, if the issuer is already filing continuous disclosure documents, the waiting period is shortened to seven days.If, prior to the effective date of the registration there occurs any change with respect to any material fact which should be stated in the SRS, or if there arises any situation prescribed by a relevant Cabinet Ordinance calling for the modification of the contents of the registration documents, the registrant should file an amendment to the SRS. The relevant Finance Bureau may, but is not obliged to, issue an order for filing an amendment to the SRS if it finds the registration documents defective or insufficient with respect to any material facts stated therein. Once an amendment to the SRS is filed, the aforementioned waiting period starts, on or several days after the day of filing of such amendment to the SRS, depending upon the nature of the amendment.The SRS is generally comprised of three sections: Information Concerning Securities, Information Concerning Issuer, Information Concerning Guarantor and Special Information.In addition, for the SRS for foreign Specified Securities referred to in section 2.03[3] below, the “Information Concerning the Legal System of the Home Country of the Issuer, etc.” must also be disclosed.In the securities markets, in addition to the disclosure requirements, there are regulations concerning securities transactions under the FIEA designed to ensure fair trade.Following are the methods of filing the SRS.1. Complete Disclosure MethodThe SRS must be filed by the issuer with the Director-General of the relevant Finance Bureau before the commencement of a public offering.2. Attachment MethodCompanies that filed annual securities reports for the previous year may attach annual securities reports, semi-annual securities reports or quarterly securities reports and their amendments to the SRS in order to avoid duplicate filing.3. Reference MethodCompanies that satisfy the requirements for (2) above, list their shares on the Stock Exchanges or OTC markets and also satisfy additional requirements under a Cabinet Ordinance may make reference in the SRS to the documents identified in (2) and extraordinary repots rather than attaching the entire documents.4. Shelf Registration MethodFrequent issuers that qualify to use the Reference Method can also use the Shelf Registration Method in order to render their issue more cost-efficient and timely.



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Jurisdiction Registration and Issuing Approval ProcedureAny issuer who satisfies the requirements for registration by the Reference Method referred to above may register proposed offering(s) by filing with the relevant Finance Bureau a “shelf registration statement” setting out the period during which the securities are intended to be offered, the kind of securities, the proposed total amount of offering and the anticipated principal underwriters, in accordance with a Cabinet Ordinance. The shelf registration becomes effective after a shorter period (usually, 7 days) than the period in the case of filing the SRS. Once the shelf registration becomes effective, no individual SRS need be filed for the offering of any part of the securities covered by the shelf registration but the registrant should file with the relevant Finance Bureau a “supplement to the shelf registration statement” setting out the amount of offering and other terms of the offering. The shelf registration ceases to be effective upon the expiry of the intended period thereof. If, prior to such expiry, the offerings of the total amount registered have been completed, the registrant should file a “shelf registration withdrawal statement” with the relevant Finance Bureau.If, during the effective period of shelf registration, a certain situation arises as prescribed by the FIEA and Cabinet Ordinance, the registrant should file an “amendment shelf registration statement.” No such amendment can be made to increase the total amount of offerings, change the proposed period of offerings, or change the kind of securities subject to the registration.Special provisions are made with respect to the shelf registration method for commercial papers.

TOKYO PRO-BOND Market Listing:A. Initial Listing Application for the listing of bonds on the TOKYO PRO-BOND Market:a. The listing of bonds on the TOKYO PRO-BOND Market is carried out through an application by issuers.b. The Initial Listing Applicant is required to submit an Initial Listing Application and Initial Listing Application Documents to the

Exchange for listing. i. The Initial Listing Applicant may consult or make inquiries to the Exchange prior to listing regarding the Initial Listing Application. ii. The Initial Listing Applicant shall state in the Initial Listing Application Documents that there are no false statements in the Documents. c. The Initial Listing Applicant is required to publish Specified Securities Information (specified securities information prescribed in

article 27 to 31 of the FIEA) at the time of filing an application of a listing of bonds.i. Specified Securities Information is required to be prepared based on the format stipulated by the Exchange or other formats approved by the Exchange as appropriate. For example, the disclosure formats utilized in the euro market may be approved to be used. Besides, the language of disclosure of Specified Securities Information is required to either be in Japanese or in English, or in both languages. Foreign issuers do not have to translate their English documents into Japanese.ii. Parties seeking to apply for a bond listing can register the maximum aggregate amount of bonds issued in a program by publishing the “Program Information” pursuant to the rules established the Exchange. Specifically, information on the maximum limit of the outstanding balance and other information shall be described in the Program Information, validity period of which is 1 year (equivalent to Euro medium-term note program). In the case where an issuer publishes the Program Information, such issuer is allowed to prepare the Specified Securities Information only with the remaining information. In the case where the issuer publishes the adequate Specified Securities Information after the registration of Program Information, the listing will be accepted by the Exchange following the submission of an Initial Listing Application and Initial Listing Application Documents including the Specified Securities Information.iii. Under the FIEA, if the Initial Listing Applicant is a continuous disclosure company (a company which is obliged to submit the Annual Securities Report annually), publishing Issuer Filing Information (see 3 b (ii) below for details) is not required. Also, under the rules established by the Exchange, that the disclosure company can omit the corporate information from description in Specified Securities Information, provided that such Specified Securities Information contains a notice that the company submits the Annual Securities Report.

B. Qualification Requirements for Initial Listing Companies:The Initial Listing Applicant must satisfy all of the requirements listed below when listing bonds on the TOKYO PRO-BOND Market:a. The said bonds obtain a credit rating from a credit rating agency (meaning registered credit rating agencies stipulated in article

2, paragraph 36 of the FIEA and rating agencies established under foreign laws that are subject to frameworks of regulations and supervision equivalent to those of registered credit rating agencies.).

A credit rating for the above-mentioned Program Information may be used as the credit rating. b. The securities company that serves as Managing Underwriter for bonds to be listed on the Exchange is required to be

registered on the Exchange’s Managing Underwriter List.i. Any securities company that wishes to register to appear on the Managing Underwriter List can apply to do so with the Exchange. The Exchange will then decide whether to approve the registration based on consideration of the company’s track record in corporate bonds underwriting, etc. The Exchange will also assess the ongoing eligibility of securities companies to be included on the Managing Underwriter List.



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Jurisdiction Registration and Issuing Approval Procedureii. The requirements for companies registered on the Managing Underwriter List will be different to those for J-Nomads in that they will have no duties to the Exchange in respect of the Qualification Requirements for Initial Listing Companies and no post-listing duties.

C. Approval of Listing:Once it has confirmed that the Initial Listing Applicant satisfies the Requirements for Initial Listing, the Exchange approves the listing of the bonds and publicly announces it in a timely fashion.

Republic of Korea Regulations and Rules and Procedures on Issuing Debt Instruments1. Disclosure requirementsArticle 123 (Preparation and Disclosure of Investment Prospectus), Financial Investment Services and Capital Markets Act (FSCMA): When an issuer publicly offers or sells securities in accordance with article 119, the issuer shall file an investment prospectus

(hereinafter referred to as “investment prospectus”), prepared in accordance with the manner prescribed by Presidential Decree, with the Financial Services Commission (FSC) on the day on which the relevant registration statement becomes effective (or the day on which the supplements to a universal shelf registration statement are filed, in cases where the supplements to the universal shelf registration statement shall be field in accordance with article 119[2]) and keep it at a place specified by Ordinance of the Prime Minister to make it available to the public for inspection.

<Amended by Act No. 8863, Feb. 29, 2008>

No investment prospectus shall contain any description different from the one described in the relevant registration statement (including any supplements to a universal shelf registration statement under Article 119(2); hereafter the same shall apply in this Chapter) or omit any description stated therein: Provided, that a description of the balance between confidentiality in corporate management, etc. and protection of investors, etc., as prescribed further by Presidential Decree.

An issuer of the collective investment securities specified by Presidential Decree shall file an additional investment prospectus separately from the one under paragraph (1) in accordance with the following subparagraphs, with the Financial Services Commission (FSC), and shall keep it at a place specified by Ordinance of the Prime Minister to make it available to the public for inspection: Provided, that such filling, keeping, and disclosure may be omitted, if offering or selling such collective investment securities is discounted:


A revised investment prospectus shall be filed at least once after the investment prospectus under paragraph (1) is filed within an interval prescribed by Ordinance of the Prime Minister; and

In cases where an amendment to registration is filed in accordance with Article 182 (8), an investment prospectus in which such amendment is reflected shall be filed within five days after a notice of amended registration is delivered.

[FSCMA, Chapter I in Part III]

2. Credit Rating requirementsRegulation11. Underwriting of Non-Guaranteed Bonds In the case of an underwriter underwriting non‐guaranteed bonds, such bonds shall be those that have been rated by

at least two (one agency, in the case of underwriting ABS issued in the form of bonds pursuant to the Act on ABS or in inevitable cases such as the business suspension of credit rating agencies) credit rating agencies from among those approved for the credit ratings business pursuant to the provisions of the Act on Use and Protection of Credit Information.

However, non-guaranteed bonds issued by foreign corporations, etc., shall be deemed as those rated in accordance with this provision if they are rated by two or more credit rating agencies (referring to international credit rating agencies as prescribed by the Governor of the Financial Services Commission (FSC) in Item e of [§2‐11 (2)1] of the FSC’s Regulations on Securities Issuance and Disclosure; the same hereinafter in this chapter).

[Chapter III in Regulations on Securities Underwriting Business]

3. Minimum lead time (number of business days) for registration approvalArticle120 (Effective Date of Registration Statement, etc.) The registration of securities under Article 119(1) and (2) (hereinafter referred to as “securities registration”) shall be effective on

the day after the expiration of the time period prescribed by Ordinance of the Prime Minister, considering the type of securities or the characteristics of the transaction, etc., which shall begin on the day on which the registration statement is submitted and accepted by the Financial Services Commission.


The Financial Services Commission (FSC) shall not refuse to approve a registration statement, unless it is not prepared in conformity with the prescribed form of the registration statement, there is any false description or representation in the registration statement concerning a material fact, or any description or representation of a material fact is omitted.


The effectiveness under paragraph (1) shall not include any effect of acknowledging that the descriptions of the relevant registration statement are true or correct, or the Government’s assurance or approval of the value of the securities.



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Jurisdiction Registration and Issuing Approval Procedure An issuer of securities shall, when it intends to withdraw its securities registration, file a withdrawal statement with the Financial

Service Commission (FSC) no later than the day before the date set for offering to acquire or purchase the securities stated in the relevant registration statement.

<Amended by Act No. 8863, Feb. 29, 2008> [FSCMA, Chapter I in Part III]

4. Availability of Shelf Registration and Associated Documentation RequirementsIf bond issuer uses the shelf registration, bond issuer must submit the “universal shelf registration statement” to the FSC. The legal provision for shelf registration is stipulated at Article 119(2) in FSCMA.Article 119 (Registration of Public Offering and Sale) When a registration statement for a total amount of securities to be publicly offered en bloc over a certain period of time

(hereinafter referred to as “universal shelf registration statement”) in accordance with the guidelines and methods prescribed by Presidential Decree, considering the type of securities, scheduled issue period, frequency of issuance, requirements for the issuer, etc., is submitted to and accepted accordingly by the Financial Services Commission (FSC), such securities may be publicly offered or sold without necessarily submitting a registration statement each time such securities are publicly offered or sold during the period of time stated therein, notwithstanding paragraph (1).

In such cases, the documents related to the universal shelf registration statement (hereinafter referred to as “supplements to universal shelf registration statement”), as prescribed by Presidential Decree, shall be submitted each time such securities (excluding collective investment securities, specified by Presidential Decree) are publicly offered or sold.

<Amended by Act No. 8863, Feb. 29, 2008> [FSCMA, Chapter I in Part III]

5. Regulated suspension periodThe maximum of regulated suspension period is up to six months. The suspension period is imposed by FSS, if some financial investment institutions violate the regulation or the law in FSCMA.

Malaysia Regulation of the Corporate Debt Securities and Corporate Sukuk Market: The Securities Commission (SC) administers the Capital Markets and Services Act 2007, which governs a substantial part of the activities in the domestic corporate debt securities and corporate Sukuk market. On 1 July 2000, the SC became the single regulator for the Malaysian corporate debt securities and corporate Sukuk market, and moved towards a full disclosure-based regulatory regime with the issuance of the Guidelines on the Offering of Private Debt Securities. This was followed by the issuance of the Guidelines on the Offering of Islamic Securities. Related Regulations and Rules on Issuing Debt Instruments:1. Bank Negara Malaysia (BNM) manages the liabilities of the government both in Malaysia and abroad. BNM is responsible for trading, registering, settlement and redemption of government securities through the automated trading and settlement system. BNM published the rules on Real Time Electronic Transfer of Funds and Securities and the Fully Automated System for Issuing/Tendering.2. The SC oversees the issuance of private debt securities, asset-backed securities, Islamic securities, and structured products. 3. For foreign issuers, the Quick Reference for Information on Cross-Border Bond Issuance and Investment contains information on bond issuance by non-residents in Malaysia.4. Under BNM’s Foreign Exchange Administration Policies, proceeds of bond issuances are not to be used for refinancing of offshore borrowing and/or financing of investments abroad exceeding MYR10 million in aggregate in a calendar year.

Philippines Regulation of the Philippine Securities Markets:Approximate Legislative FrameworkThe Securities and Exchange Commission (SEC) regulates both primary and secondary debt markets and oversees the Philippine Stock Exchange, the three subsidiaries of the Philippine Dealing Systems Holdings Corporation, brokers, registrars, transfer agents, and clearinghouses.

Related Regulations and Rules Disclosure RequirementsDebt securities may not be offered for sale to the public, unless they are registered in accordance with sections 8 and 12 of the Securities Regulation Code (SRC), as implemented by SRC Rules 8.1 and 12.1, except those exempt from registration under section 9 (Exempt Securities) and section 10 (Exempt Transactions) of the SRC and SRC Rules 9.2 and 10.1. Likewise, no information relating to the offering of securities shall be disseminated unless a registration statement has been filed with the SEC, along with a preliminary prospectus of the securities intended to be sold and distributed to the public.If the securities which are the subject of the registration statement are intended to be listed in an exchange, a copy of said registration statement and all other pertinent documents shall also be filed with that exchange. The application for the listing shall also be filed with the SEC.Upon filing the registration statement, but before it is rendered effective by the SEC, the registrant may circulate a preliminary prospectus to prospective buyers of the securities. The preliminary prospectus should prominently state that the registration statement pertaining to the securities has been filed but has not yet been approved by the SEC, and that the said prospectus does not constitute an offer to sell or a solicitation of an offer to buy.Both the preliminary and final prospectus shall be worded in plain language understandable to an ordinary person.



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Jurisdiction Registration and Issuing Approval ProcedureThe registrant should also be able to show that the prospectuses were made readily available to all those who want a copy, in sufficient copies.The sale of securities, which are the subject of the registration statement, shall be commenced within two (2) business days from the effective date of the registration statement and shall be continued until the end of the offering period or until sale has been terminated by action of the issuer. A written notice of completion or termination of the offering shall be filed with the SEC within three (3) business days therefrom, indicating the number of securities sold. If the remaining registered but unsold securities shall be offered after the completion or termination of the sale, an updated registration statement shall be filed with the SEC prior to said offering or sale.

Commercial PapersThe conditions for registration of commercial papers issued by corporations to the public are provided by SRC Rule 12.1, the salient points of which are as follows:(i) Registration statement under SEC Form 12-1 in accordance with SRC Rules 8.1 and 12.1.(ii) Firm commitment underwriting agreement for the commercial paper with a universal bank, investment house, or any other financial institution duly licensed under the Investment Houses Law.(iii) Except for issuance amounting to not more than 25% of the issuer’s net worth or where there is an irrevocable committed credit line with a bank covering 100% of the proposed issuance, a commercial paper issue shall be rated by a rating agency accredited by the SEC.

The rating requirement shall not apply to issuances amounting to not more than 25% of the issuer’s net worth, or where there is an irrevocable committed credit line with a bank covering 100% of the proposed issuance.(iv) Payment of a filing fee, which shall be based on the total amount of commercial papers proposed to be issued and shall be subject to a diminishing fee in accordance with SEC Form 12-1.

Singapore Issuing Debt Instruments related regulations/rules:1. Disclosure requirementsDisclosure requirements for the issuance of debenturesUnder section 243 of the Securities and Futures Act (SFA), a prospectus for an offer of securities shall contain all the information that investors and their professional advisers would reasonably require to make an informed assessment of the matters relating to the offer and the issuer.The Securities and Futures (Offers of Investments) (Shares and Debentures) Regulations 2005 (SFR) sets the specific disclosure requirements for the different types of debentures (including asset-backed securities and structured notes). The SFR also prescribes the disclosure requirements for an offer of debentures under a debenture issuance program. The prospectus for an offer of debentures must normally include terms of the debentures, use of proceeds, identity of directors, capitalization and indebtedness, audited financial statements and interested person transactions.A listed company can make an offer of debentures using an Offer Information Statement, which is a more concise disclosure document, in place of a prospectus.

2. Debenture Issuance ProgramUnder the SFA, an issuer can make multiple offers of bonds using a debenture issuance program (DIP). The prospectus for an offer of debentures that is part of a debenture issuance program shall comprise a base prospectus applicable to every offer under the DIP, and a pricing statement applicable to a particular offer. The registered base prospectus is valid for 2 years.

3. Stop OrderThe Monetary Authority of Singapore (MAS) may, under section 242 of the SFA, serve a stop order on a person making an offer of securities that no or no further securities be allotted, issued or sold. The MAS may do so if a prospectus has been registered and:(a) the MAS is of the opinion that the prospectus contains a false or misleading statement;(b) there is an omission from the prospectus of any information that is required to be included in it;(c) the MAS is of the opinion that the prospectus does not comply with the requirements of the SFA; or(d) The MAS is of the opinion that is in the public interest to do so.

The MAS may also serve an interim stop order on the person making the offer. If the interim stop order is served during a hearing, or a hearing commenced while the stop order is in force, the interim stop order will remain in force until the MAS serves a stop order. Otherwise, if there is no hearing, the interim stop order will be in force for a period of 14 days, unless it is revoked by the MAS.

Thailand Securities Issuance Rules in Brief:1. Approval for Securities Offering The Securities and Exchange Commission Act (SEC Act) B.E. 2535 (1992)Chapter 2 Issuance of Securities Division 1 Approval for the Offering of Newly Issued Securities (Sections 32-38)Division 2 Debentures (Sections 39-40)Division 3 Issuance of Secured Debentures (Sections 41-49)



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Jurisdiction Registration and Issuing Approval ProcedureDivision 4 Register and Transferability (Sections 50-55)Division 5 Disclosure of Information and Auditor (Sections 56-62)Chapter 3 Public Offering of Securities (Sections 63-89)Division 4 Listed Securities (Sections 189-200)Chapter 6 Over-the-Counter Centre and Futures and Options CentreDivision 1 Over-the-Counter Centre (Sections 204-217)Chapter 7 Institutions Related to Securities BusinessDivision 1 Clearing House, Securities Depository Centre and Securities Registrar (Sections 219-229)The SEC Act B.E. 2535 (1992) prohibits companies from offering newly issued shares and other securities for sale without prior approval from the SEC in compliance with the rules and regulations issued by the SEC Board except for the rights offering to existing shareholders.

This provision allows the SEC to put in place rules and regulations and consider the merits of the securities to be offered.Securities offering can be classified by types of securities as follows: (i) Shares(ii) Derivative warrants(iii) Debt Securities(iv) Overseas Debentures(v) Warrants(vi) Securitization(vii) Securities Issuance and Offering by Foreign Issuer (viii).Foreign exchange bond (ix) Sukuk

Private placement of debt securities exempt from SEC filing for registration:Private placement of debt securities which is exempt from SEC filing for registration is defined in the following Notification.Notification of the Capital Market Supervisory Board No.TorChor.9/2552 (2009)Re: Application for and Approval of Offer for Sale of Newly Issued Debt Securities

2. Disclosure of Information In offering newly issued securities for sale, companies shall apply for an approval from the SEC and disclose information to the investing public for decision making. However, the offering of existing securities by its holders can be done without SEC approval on the condition that the offerors shall disclose information prior to offering securities for sale.

Before offering securities to the public, the offerors, who may be companies or existing shareholders, shall file a registration statement and a draft prospectus to the SEC to give investors time to study such information. However, some types of securities offering are not required to file such documents if the offering does not affect the general public. The offering of securities for sale is allowed upon: (i) The SEC approval in case of newly issued shares; and(ii) The effectiveness of the registration filing. During the filing process, information shall be disclosed with discretion and within the limit of permitted scope.

3. Post-Offering Duties After offering securities for sale to the public, companies shall undertake securities settlement with the holders in accordance with the SEC regulations and disclose information on a continual basis to give investors information for making investment decision. Information of securities subject to public disclosure includes:

(i) Report of securities selling(ii) Report of rights exercising on convertible securities, i.e., warrants and convertible debentures(iii) Report of financial condition and operational performance, consisting of financial statements and annual reports (Form 56-1 and 56-2)(iv) Report of securities holding of the issuing company management

4. Regulatory transaction reporting requirements The SEC stipulates that all licensed dealers must report transactions of each bond to the Thai Bond Market Association (ThaiBMA) within 30 minutes after trade.

Practically, trades are submitted to ThaiBMA within 15 minutes on average. All reports are scrutinized by the Monitoring and Surveillance department to ensure accuracy and integrity prior to compilation and dissemination to the general public and for the mark-to-market purpose.



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Jurisdiction Registration and Issuing Approval ProcedureFiling and Approval criteria: 1. Plain debt(ü: means ‘Yes,’ ‘exists’ or ‘required’)Filing 1. Public Offering (PO) ü: Requires filing to SEC2. Non Retail Investor (NRI) ü: Requires filing to SEC

Min. disclosure3. Exempt < 10 persons

Treasury bill (T-bill), Government bond, Ministry of Finance (MOF) bond, Bank of Thailand (BOT) bond

2. Complex debt(ü: means ‘Yes,’ ‘exists’ or ‘required’)Filing 1. PO ü: Requires filing to SEC2. NRI ü: Requires filing to SEC

Min. disclosure3. Exempt < 10 persons

T-bill, Government bond, MOF bond, BOT bond

SEC Approval Criteria Thailand1. Plain Debt 1.1 PO ü: Requires SEC approval 1.1.1 Eligible entities Local company and foreign companya

1.1.2 Others Local Issuer Both bond and foreign exchange bond:1. Never breach to offering rule2. Qualified executive w/o prohibited qualification 3. Disclose the latest annual and quarter financial statement4. Rated by accepted credit rating agency (CRA) 5. Register with ThaiBMA 6. Foreign exchange bond: issuer required approval from BOT

in relation to foreign exchange control (additional)Foreign Issuer Baht bond: approval from MOF Foreign exchange bond:a. Never breach to offering ruleb. Disclose financial status (IFRS/FAS/US GAAP/other

acceptable standard) c. Contract person in Thailandd. Offering debt in Thailand is not beach the issuance’s

country lawe. IOSCO-signatory Af. Issuer requires approval from BOT in relation to foreign

exchange control 1.2 NRI ü: Approval in general easier 1.2.1 Eligible entities Local company & foreign company 1.2.2 Others a. Limited transferability

b. Rated by accepted CRA c. Register with Thai Bond Market Association(< 10 persons, issuer is not required to comply with 2. and 3.)

2. Complex 2.1 Underlying Local securities, local/foreign securities index, currency, gold,

cash in/out flow, credit link, credit default



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SEC Approval Criteria Thailand 2.2 PO ü: Requires approval from SEC 2.2.1 Eligible entities Local company

(a) Derivatives dealer(b) Commercial bank (underlying = gold, foreign exchange) (c) Cash inflow/outflow or main business are related to the

reference underlying 2.2.2 Others 1. Never breach to offering rule

2. Qualified executive w/o prohibited qualification 3. Disclose the latest annual and quarter financial statement4. Rated by accepted CRA 5. Register with Thai Bond Market Association6. Redeemed value > 80% of par value7. Issuer is not a related party of the underlying company

2.3 NRI ü: Requires approval from SEC 2.3.1 Eligible entities Local company

– Derivatives dealer 2.3.2 Others 1. Limited transferability

2. Rated by accepted CRA 3. Register with Thai Bond Market Association(< 10 persons, issuer is not required to comply with 2. and 3.)

3. Are the following regimes in place in jurisdiction?

YES NOPrivate Placement Regime XInstitutional Offerings Regime XIntegrated Disclosure Regimeb (including continuous disclosure) XShelf Registration Regime X

4. Minimum lead time (number of business days) for registration approval

TIME PERIOD (MONTHS)How long is the time period set which the regulator has to approve or disapprove the prospectus?

Offering corporate bond to Institutional Investor (II) and high net worth investor (HNWI) effective within the next business day as from the date of filing prospectus in full. Offering Corporate Bond to the Public (Public Offering) effective after the end of the 14-day period from the day the office receives prospectus in full.

How long in average is the prospectus reviewing period in your jurisdiction? (From the time of application until the approval/disapproval by the regulator)

About 20–30 days.

5. Summary of regulation for issuing and offering of corporate bondsCorporate bond offering regulations can be summarized as follows;

Private Placement (PP) Public Offering (PO)PP (Narrow Distribution/Small

Size/Short term)PP (II and HNWI)

Distribution Narrow Distribution1. < 10 person or2.For debt restructuring or3. Overseas institutional investors4. Convertible bond sold to the existing shareholders or5. Total number of the bill issued are less than ten

II and HNWI General investors including individuals



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Private Placement (PP) Public Offering (PO)

PP (Narrow Distribution/Small Size/Short term)

PP (II and HNWI)

Issue size(Stock Exchange of Thailand Rule for Listing Qualification)

In case of small (less than THB100 million), cannot be listed (Unlisted)

Not less than THB100 million - can be listed.

Not less than THB100 million - can be listed

Short term bills SEC Filing Not required (Exempt)

Require filing to SEC

SEC Filing of the registration statement and draft prospectus

SEC Filing Not required (Exempt)

SEC Filing Required but Light(Free form, 1-day processing)

Notification of the Capital Market Supervisory Board No. TorChor.10/2552 clause 18 (1) (please see the attachment file)

SEC Filing Required (full form, full process)

Continuous Disclosure requirement

Not required (Exempt) Require same disclosure at the same time that send to lead regulator

An annual report is required to be filed with the SEC.

Rating Not required (Exempt) Required, butIssue, Issuer, Guarantor rating (any can be used)

Required.Long-term: issue/ guarantor rating Short-term: issue/ issuer/ guarantor rating

ThaiBMA registration Not required (Exempt) Required (newly issued bond) Required (newly issued bond)

Bond representative Not required (Exempt) Not required (Exempt) Required

a. The bond can be offered for sale by way of PO or PP. PP generally means to offer for sale to institutional investors, high net worth investors, and specific investors.b. Approval from the SEC is required for the offer for sale by way of a Public Offering. A full filing form (a specific form prescribed by the SEC) and draft prospectus have to be submitted to the SEC.c. PP (Narrow Distribution/Small Size) is exempt from filing requirement.d. PP (II and HNWI) is exempt from full filing requirement. (Light requirement remains).e. The concept of II or Qualified Foreign Institutional Investor (QFII) does not only apply to securities available for sale in the Exchange Market but also applies to debentures issued by way of private placement.f. A credit rating is also required for an offer for sale by way of a PO and PP.g. The newly issued bond must be registered with the ThaiBMA.h. A bond representative is needed for an offer for sale by way of a PO.i. An annual report is required to be filed with the SEC.

Viet Nam A key legislation regulating securities and the securities market is the Securities Law 2006 (No. 70/2006/QH11), which took effect on 1 January 2007. The scope of the law covers the public offers of securities, listing and trading securities, conducting business and investing in securities, securities services and the securities market.Issue authorization and disclosure duties for public offering bonds are as follows: After registration, actual (corporate) bond issues should obtain the State Securities Commission’s (SSC) authorization for issuance of bonds with a set of disclosure information.1. Conditions for Offering Bonds to the Publica. The enterprise must have its paid-up charter capital at the time of registration for public offering of at least VND10 billion in book value;b. Being profit making in the year preceding the year of such registration for offering, it must have no accumulated losses up to the year of registration for offering or overdue debts of over 1 year.c. It must have a plan for offering and use and refund of capital received from the offering approved by the Board of Management, Board of Members, or the enterprise’s owner.d. It must commit to fulfill obligations of the issuer towards investors, meet conditions for issuance and payment, and ensure investors’ legitimate rights and interests, and other conditions.



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Jurisdiction Registration and Issuing Approval Procedure2. Condition for Offering Securities to the Public, Overseas, and Other Specific CasesThe government shall stipulate the conditions for offering securities to the public applicable to state-owned enterprises (SOEs); foreign-invested enterprises (FIEs), which are transformed into joint stock companies; and newly established enterprises in the fields of infrastructure or high technology. It shall also set out the conditions for offering securities overseas and other specific cases.

3. Registration of Offering Securities to the Publica. The issuer carrying out the offering of securities to the public shall have to register with the SSC.b. The following cases shall not be subject to registration for offering securities to the public:

i. Offering of bonds of the Vietnamese Government;ii. Offering of international financial institutions’ bonds accepted by the Vietnamese Government;iii. Offering of shares to the public by SOEs, which are transformed into joint stock companies; andiv. The sale of securities upon a court judgment or decision, or the sale of securities by the managers or the persons

entitled to assets in case of bankruptcy or insolvency.

4. Information prior to Public Securities OfferingAt time the SSC reviews the public securities offering registration dossier, the issuer, the underwriter(s), and other relevant organizations and individuals may only use, in an honest and accurate manner, the information described in the prospectus submitted to the SSC to explore the market, provided that they shall clearly specify that the information on the date of issue and the securities selling price is the proposed information. Exploring the markets must not be conducted through the mass media.

5. Effectiveness of the Public Securities Offering Registrationa. Within 30 days from the date of receipt of the valid dossier, the SSC shall examine and grant the Certificate for Public

Securities Offering. In case of refusal, it must respond in writing and clarify the reasons thereof.b. The Certificate for Public Securities Offering granted by the SSC shall be a document certifying that the public securities

offering registration dossier fully satisfies the conditions and procedures provided by law.c. Within 7 days from the date the Certificate for Public Securities Offering comes into effect, the issuer shall publish the

Announcement of Offering in three consecutive issues of one electronic newspaper or written newspaper.d. The securities shall only be offered to the public after the announcement has been made, as stipulated in clause 3 of this

Article.a Baht bond: International financial institution or foreign government or multinational corporation in ASEAN+3 countries.b An integrated disclosure regime which allows the issuer to incorporate by reference continuous disclosure documents into its public offering documents, thereby easing the

disclosure burden of public offerings. It allows the qualified issuer to file disclosure documents for a new public offer by incorporating continuous disclosure documents by reference and minimizes the redundancies.

FAS = Financial Accounting Standards; IFRS = International Financial Reporting Standards; IOSCO = International Organization of Securities Commission; US GAAP = US Generally Accepted Accounting PrinciplesSource: ADB Consultants, based on research materials and market visit information.

XV. Necessity of Disclosure of Ultimate Beneficial Owner

Table 15. Necessity of Disclosure of Ultimate Beneficial Owner

JurisdictionRegulators’ Policy related to the Necessity of

Disclosure of Ultimate Beneficial Owner Direct or Indirect Account Holding SystemPeople’s Republic of China Yes. Beneficial Owner to be disclosed

Hong Kong, China No policy Both

Indonesia No requirement by law.Typically grouped by tax rate/domicile.

Both

Japan No policy Direct(Account holders have the rights directly against issuers)

Republic of Korea No policy Direct

Malaysia No policy Both

Philippines No policy Registered holders have legal rights against the Issuer.

Singapore No policy Both

Thailand No policy Both

Viet Nam No policy IndirectSource: ADB Consultants, based on research materials and market visit information.


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XVI. Foreign Exchange and Currency-Related Restrictions

Table 16. Foreign Exchange and Currency-Related Restrictions


Floating


(2. Investment principal)(3. Coupons/dividends)

Currencies eligible for Continuous

Linked Settlement Bank Settlement


Government controlled floating, rate referring to currency basket

1. Restricted -

2. Restricted for certain period of time after investment


Hong Kong, China Link to US dollar (Currency Board System)

1. No restriction Yes

2. No restriction

3. No restriction

Indonesia Floating 1. Restricted. (Rupiahs foreign-exchange trades must be done by Indonesian domestic banks, rupiah remittance between foreign banks is prohibited)

-

2. No Reporting required for repatriation of benefits.

3. Reporting required

(*) Real-demand principle applies to inbound foreign exchange or buy Indonesian rupiah only.

Japan Floating 1. No restriction Yes

2. No restriction. (ex post facto report required)

3. No restriction. (ex post facto report required)

Republic of Korea Floating 1. Restricted Yes

2. No restriction

3. No restriction

Malaysia Managed float against a basket of currencies, following the de-pegging of the ringgit

1. Restricted (All remittance out of the country must be made in foreign currency). Real-demand principle applies to inbound foreign exchange only.

-

2. No restriction for non-resident investors to repatriate in foreign currency.

3. No restriction for non-resident investors to repatriate in foreign currency.

Philippines Floating 1. Restricted. Registration with Bangko Sentral ng Pilipinas (BSP) for issuance of Bangko Sentral Registration Document (BSRD) on per transaction basis is required to qualify for automatic conversion of peso sale/interest into foreign exchange for outward repatriation.

-

2. Registration with BSP for issuance of BSRD on per transaction basis is required to qualify for automatic conversion of peso sale/interest into foreign exchange for outward repatriation.

3. Interest automatically qualifies for outward repatriation if principal investment has BSRD.

Singapore Floating against basket of currencies

1. No restrictions (investor can hold Singapore dollar in, e.g., Tokyo) Yes

2. No restriction

3. No restriction

Thailand Managed Floating 1. Restricted -

2. Reporting is required.

3. Reporting is required.

Viet Nam Controlled Floating 1. Restricted -


3. No restriction

(Viet Nam issue is based on availability of foreign currency.)Source: ADB Consultants, based on research materials and market visit information.

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XVII. Omnibus Securities Account and Nominee Concept

Table 17. Omnibus Securities Account and Nominee Concept

Jurisdiction Existence of Omnibus Securities Account Existence of Nominee ConceptPeople’s Republic of China

No. Securities must be kept in the name of the beneficiary owner. No.

Hong Kong, China Yes. Yes.

Indonesia Yes. Yes.

Japan Yes. Yes.

Republic of Korea Yes.But, the foreign exchange regulation in Korea does not allow omnibus accounts for payments for foreign investors. To avoid this, foreign investors who use international central securities depositories (ICSDs) have the status of a Qualified Financial Intermediary (QFI) and are allowed to use omnibus accounts. (See details below).

Yes.But it cannot be applied to foreign investment in bonds.

Foreigners who invest in Korean domestic bonds normally depend on local or global custodians to settle their transactions and keep the bonds they have acquired. In making settlement for securities transactions, custodians usually use omnibus accounts through which they consolidate all of their clients’ transactions into a single account and make payments and deliveries using that account.The foreign exchange regulation in Korea, however, requires that payments to settle securities transactions by foreigners must be processed through the individual account of each foreign investor. Since omnibus accounts for payments are not allowed for foreign investors, the custodian banks in charge of settling the bond transactions of foreign investors have to make payments through the individual account of each foreign investor. Prior to 2007, ICSDs did not provide settlement service for Korean bonds because the use of omnibus accounts by foreign investors was prohibited. As a consequence, it is plausible that Republic of Korea may have been losing potential foreign investments from those who would have invested in Korean bonds had they been able to settle their transactions through ICSDs.To address this shortcoming, the Korean government allowed ICSDs to use omnibus accounts to settle transactions of domestic bonds by foreign investors. The revised regulation stipulates that Clearstream and Euroclear can provide settlement services for the country’s government bonds and Monetary Stabilization Bonds (MSBs) through their omnibus accounts set up at the Korea Securities Depository. Allowing omnibus accounts not only provides foreign investors with the benefit of lower cost and convenience in settlement, but also enables them to avoid significant institutional impediments. First, foreign investors do not have to register with the Financial Supervisory Service and get an investment registration certificate in advance if they settle their transactions of Korean domestic bonds through an ICSD. They can simply hold Korean domestic bonds at the representative omnibus account under the title of an ICSD. In addition, the new regulation enables over-the-counter (OTC) transactions of Korean domestic bonds when these are deposited in and settled through the omnibus accounts of an ICSD. As a result, a foreign investor may now sell Korean government bonds to another foreign investor through a direct OTC transaction when both parties engage in the transaction via financial institutions that have settlement accounts at an ICSD.Allowing ICSDs to make settlements using a representative omnibus account, however, may cause some problems in relation to the income tax exemption for foreigners. As was mentioned earlier, the Korean government decided to give foreign investors exemption from withholding tax on interest income from government bonds and MSBs in January 2009. Since foreign investors no longer need an investment registration certificate if they settle their transactions through the omnibus account of an ICSD, a domestic investor can easily disguise himself as a foreign investor by making settlement through an ICSD to gain a tax exemption on interest income. Under this system, the settling members of ICSDs that acquire QFI status are allowed to make settlement of Korean domestic bond transactions for their customers through the omnibus accounts of ICSDs. In order to qualify as a QFI, a financial institution is required to assess customer adequacy of foreign investors for tax exemption and keep track of the bond transactions and holding records of foreign investors so that they can report to Korea’s National Tax Service as necessary.In spite of the clear benefits, the use of omnibus accounts is an exception rather than a rule. It is only the ICSDs that are allowed to use omnibus accounts. Therefore, foreign investors who do not settle their domestic bond transactions through ICSDs are still subject to restrictions such as registration requirements, prohibition of direct OTC transactions between foreign investors, and prohibition on the use of omnibus accounts.

Malaysia Yes. Yes.

Philippines Yes. Yes.

Singapore Yes. Yes.

Thailand Yes. Yes.

Viet Nam Yes. No.Source: ADB Consultants, based on research materials and market visit information.

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XVIII. Main Trading Places (Over the Counter or Exchange) and Existence of Exchange trading

Table 18. Main Trading Places (Over the Counter or Exchange) and Existence of Exchange Trading

Jurisdiction Is the Over-the-Counter Market a Main Trading Place? Exchange Market TradingPeople’s Republic of China Yes, Inter-bank Bond Market, not directly available to foreign investors.

Domestic institutions are permitted to trade in the over-the-counter (OTC) market.

Yes (Shanghai Stock Exchange and Shenzhen Stock Exchange).

Hong Kong, China Yes Yes (Hong Kong Stock Exchanges and Clearing), but only accounts for a relatively small portion of all the trading in bonds.

Indonesia Yes Possible, but hardly observed.

Japan Yes No.

Republic of Korea Yes Yes (Korea Exchange). Government Bonds.

Malaysia Yes (Only for unlisted debt securities) No.

Philippines Yes No.

Singapore Yes Yes. (Government Bonds, mainly for retail investors, 2011-)

Thailand Yes. Bond Electronic Exchange provides electronic platform for OTC fixed-income trading named Fixed-Income and Related Securities Trading System.

No.

Viet Nam Yes, but not yet regulated. No.Source: ADB Consultants, based on research materials and market visit information.

XIX. Listing of Bonds and Obligation for Market Listing (Domestic Market)

Table 19. Listing of Bonds and Obligation for Market Listing (Domestic Market)

Jurisdiction Name of ExchangeObligation for Market

Listing Purpose of the ListingPeople’s Republic of China Shanghai Stock Exchange and Shenzhen Stock Exchange Yes for Exchange Market.

No for Inter-bank Bond Market.Profiling and real listing for trading

Hong Kong, China The Stock Exchange of Hong Kong No. Profiling, regulatory and price discovery purposes

Indonesia Indonesia Stock Exchange No. Profiling

Japan Tokyo Stock ExchangeTOKYO AIM (TOKYO PRO-BOND Market)

No. Profiling

Republic of Korea Korea Exchange No. Profiling

Malaysia Bursa Malaysia No. Profiling

Philippines Philippine Dealing and Exchange for onshore trading of fixed-income securities.

No. Profiling

Singapore Singapore Exchange Securities Trading: listed fixed income Inter-bank money market: Unlisted fixed income

No. Profiling/Trading

Thailand Bond Electronic Exchange No. Profiling

Viet Nam Ho Chi Minh Stock Exchange Hanoi Stock Exchange

Yes. Profiling


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XX. Necessity of Credit Rating for the Issuing of Bonds

Table 20. Necessity of Credit Rating for the Issuing of Bonds

JurisdictionObligation to acquire rating at the issuance of the bond Remarks


Yes. All the issues are rated AAA. There is no accumulation of default data, hence difficult to diversify the issuance.

Hong Kong, China No. There are no credit rating agencies (CRAs) based exclusively in Hong Kong. However, the three largest international CRAs have offices in this jurisdiction, alongside several smaller multinational CRAs. In view of the revised Code of Conduct Fundamentals for Credit Rating Agencies issued by the International Organization of Securities Commissions in May 2008 and the Declaration on Strengthening the Financial System made by the Group of Twenty on 2 April 2009, the Securities and Futures Commission (SFC) is proposing to introduce a regulatory framework to strengthen its oversight of CRAs. Refer to the Consultation Paper and Consultation Conclusions Concerning the Regulatory Oversight of Credit Rating Agencies, which are published in the SFC’s website.

Indonesia Yes. Issuer who will issue debit security or bond (efek bersifat utang, EBU) should obtain rating of referred EBU from a CRA, based on Peraturan Bapepam dan LK nomor IX.C.11: Pemeringkatan EBU, who is holding a business license from Bapepam-LK based on Peraturan Nomor V.C.2: Perizinan Perusahaan Pemeringkat Efek. Rating is an opinion from CRA concerning the ability of parties who are rated to meet payment obligations in a timely manner (company rating) and/or related to the securities issued by referred parties (instrument rating). Ratings could be done to: a. EBU, Sukuk, Asset-Backed Securities or other rated securities;b. Party as an entity, including Mutual Funds and Real Estate Investment Trust in form of a Collective Investment Contract.PT ICRA Indonesia, PT Pemeringkat Efek Indonesia and PT Fitch Ratings Indonesia are the existing CRAs in Indonesia.Indonesia is the only jurisdiction that imposes rating requirements for bonds seeking listing status.

Japan No.But, TOKYO PRO-BOND Market Listing requires Credit Rating

Credit rating was introduced in Japan in the 1980s, and it has become general practice in issuing of and investing in corporate bonds.In Japan, bonds with a credit rating of BB, B, CCC, CC, or C, which are called “junk bonds” or “high yield bonds,” did originally not exist in the primary market because of a policy that excluded bonds that did not meet the eligibility standards established by the market participants.However, today there are no such regulations because the eligibility standards were abolished in 1996. Nevertheless, few BBB-rated bonds, let alone junk bonds, have been offered in the market.

Qualification Requirements for Initial Listing Companies on the TOKYO PRO-BOND Market:The Initial Listing Applicant must satisfy all of the requirements listed below when listing bonds on the TOKYO PRO-BOND Market:The said bonds obtain a credit rating from a credit rating agency (meaning registered credit rating agencies stipulated in Article 2, Paragraph 36, of the Financial Instruments and Exchange Act and rating agencies established under foreign laws that are subject to frameworks of regulations and supervision equivalent to those of registered credit rating agencies.).A credit rating for the above-mentioned Program Information may be used as the credit rating.

Republic of Korea Yes. When a company issues corporate bonds in order to raise long term capital for over one year from the direct financing market, they are required to obtain a credit rating from a specialized credit rating agency for all non-guaranteed bonds in order to protect small-cap investors who lack professional knowledge on the issuer, and in order to induce a reasonable price in the bond market.All non-guaranteed corporate bonds, excluding government bonds and bonds, for which the government has guaranteed the payment of principal and interest, as well as municipal bonds and monetary stabilization bonds issued by the Bank of Korea, must receive a credit rating in order to be included in the trust assets of banks and investment trust companies. In other words, bonds being issued without guarantee including those by ordinary companies, specialized lenders, financial investment firms, commercial banks, the Korea Development Bank, government-funded agencies and pension funds, must first receive a credit assessment from a specialized credit rating agency. Corporate bonds’ credit ratings are used as criteria for deciding upon investment when issuing and trading non-guaranteed bonds.


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JurisdictionObligation to acquire rating at the issuance of the bond Remarks

Malaysia Yes. In Malaysia, all debt securities and Sukuk issues are required to be accompanied by a credit rating at all times.Private Debt Securities Guidelines (Extract)Revised: 12 July 2011/Effective: 12 August 2011 Securities Commission (SC)Deemed approval process for ringgit-denominated private debt securities5.03 Notwithstanding paragraph 5.01, a proposed issue, offer or invitation of ringgit-denominated private debt securities (including a debt program) will be deemed approved by the SC upon fulfilling the following conditions: (a) The issue, offer or invitation has either (i) been assigned a local rating of AAA by a domestic credit rating agency registered with the SC or, (ii) subject to the requirements stated in paragraph 5.04, been assigned an international rating of at least BBB- (or its equivalent) or a regional rating of AAA by an international credit rating agency;

Philippines Yes. As a general rule under Securities Regulation Code Rule 12.1-6, all commercial papers or evidences of indebtedness are required to be rated by a rating agency accredited by the Securities and Exchange Commission, except: (1) Government and government-guaranteed debt securities; or (2) Issuance amounting to not more than 25% of the issuer’s net worth; or (3) Where there is an irrevocable committed credit line with a bank covering 100% of the proposed issuance.

Singapore No. But, As a foreign debt securities listing requirement of Singapore Exchange (SGX), the issue of debt securities must have a credit rating of investment grade and above.

Singapore does not have any home-grown credit rating agencies, but instead relies on international rating services. As a foreign debt securities listing requirement of SGX, the issue of debt securities must have a credit rating of investment grade and above. The same requirements apply for the listing of local debt securities, with the additional requirement that for the Issuer qualifying under the listing requirements, the issue of debt securities must have a principal amount of at least SGD750,000.Credit Rating requirements:Under the Securities and Futures (Offers of Investments) (Shares and Debentures) Regulations 2005, where the issuer or the bonds being offered have been given a credit rating by a credit rating agency, the following should be disclosed in the prospectus:(a) The name of the CRA;(b) The credit rating (including whether it is a short-term or long-term credit rating);(c) Whether or not the relevant entity, its guarantor entity or any of their related parties had paid any fee or benefit of any kind to the CRA in consideration for the credit rating; and(d) The date on which the credit rating was given.

Thailand Yes. According to the Securities and Exchange regulations, newly issued debentures to public offering (PO) issues must have a credit rating from an authorized credit rating agency. Most private placement (PP) issues are also required to have a credit rating but on the basis of more relaxed regulation. To elaborate on this, PO issues need to have issue ratings; PP issues can choose to have either issue or issuer ratings; PP with limited distribution (i.e., fewer than 10 investors) is exempted from ratings.

Viet Nam No. Currently, there is no domestic credit rating agency in this country.Global rating agencies such as Standard & Poor’s (S&P), Moody’s Investor Service, Fitch Ratings, and Rating and Investment Information (R&I) have assigned credit ratings for Viet Nam. Viet Nam’s first credit rating agency, Viet Namnet Credit Ratings Centre, opened in June 2005, but discontinued its operations after less than 1 year.

Source: ADB Consultants, based on research materials and market visit information

XXI. Documentation Language

Table 21 Documentation Language

Jurisdiction Main language Alternative languagePeople’s Republic of China Chinese

Hong Kong, China English Chinese

Indonesia Bahasa Indonesia English



83


Jurisdiction Main language Alternative languageJapan Japan* English for TOKYO-PRO

BOND Market Listing

Republic of Korea Korean (Hangul)

Malaysia English

Philippines English

Singapore English

Thailand Thai English

Viet Nam Vietnamese* Japan is in the process of introducing a partial English-based documentation for disclosure from April 2012; Although the information for securities should be submitted in

Japanese, most disclosure information for the issuer (including already disclosed reference information) can be submitted in English, except for some specific information. Non-resident issuers’ burden will, thus, be reduced.


XXII. Concept/Definition of Professional or Institutional investors

Table 22. Concept and Definition of Professional or Institutional investors

JurisdictionConcept and Definition of

Professional or Institutional investors RemarksChina • Noconceptordefinitionof‘professional’(investor)evidentin

Chinese law.• Professionalisoftentakensynonymousto‘experienced.’

• ThePeople’sBankofChinaisconsideringtheconceptof Qualified Institutional Buyer (QIB), i.e., a professional investor category, with related disclosure and even potentially specific instruments for this investor category.

The Inter-bank Bond Market is the over-the-counter (OTC) market for institutional investors. Investment bodies include all types of institutional investors such as commercial banks, insurance companies, securities companies, funds management companies, enterprises and public institutions. At present, the Inter-bank Bond Market has over 10,000 members, covering all types of financial institutions such as commercial banks, securities companies, insurance companies, and various kinds of investment products like mutual funds and pension funds, among which commercial banks are the most active participants.

Hong Kong, China

• A“professionalinvestor”includesanyauthorizedfinancialinstitution,anyrecognizedexchangecompany,recognizedclearinghouse, any authorized insurer, any investment services intermediary, collective investment scheme, any government institution that performs the functions of a central bank, and any person of a class which is prescribed by rules under section 397 of the SFO (section 1 of Part 1 of Schedule 1 to the SFO).

• AnoffertosellbondstoprofessionalinvestorsisnotrequiredtocomplywiththeprospectusrequirementsintheCompaniesOrdinance (CO) as stipulated in the Exemption in Paragraph 1 of Schedule 17 to the CO. This is contrasted with a general offer of bonds to the public, which has to comply with a prospectus requirements in the CO.

Indonesia Indonesia does not have specific definitions on this type of professional investors.

Bapepam-LK is working on definitions of professional/individual investors.

Japan 1. The following categories are specified (professional) investors.a. Qualified Institutional Investors (meaning persons specified by a Cabinet Office Ordinance as those having expert

knowledge of and experience with investment in Securities); b. The State (Japan); c. The Bank of Japan; and d. Investor Protection Funds, and other juridical persons specified by a Cabinet Office Ordinance (excluding those that are

deemed to be non-specified investors according to agreements (opt-out)). Corporations and individuals that are deemed to be specified investors according to agreements (opt-in).a

2. Qualified Institutional Investors (QIIs)QIIs include securities companies, investment management companies, investment corporations, foreign investment corporations, banks, insurance companies, certain pension funds, general partners of certain partnerships. Juridical persons referred to companies whose shares are listed on stock exchange(s) in Japan, companies whose stated capital is likely to be JPY500 million or more and foreign corporations.



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Professional or Institutional investors RemarksRepublic of Korea The Financial Investment Service and Capital Market Act (FSCMA) classifies an ordinary investor and a professional investor

based on the expertise of their professional knowledge and experience as well as the amount of assets.A professional investor refers to an investor who does not need any strong investor protection measures considering its own expertise and experience, such as a nation, a local municipality, a central bank, and a financial institution. Most individual investors fall under the classification of an ordinary investor with the exception of an investor whose financial investments exceeds KRW5 billion. Such classification aims to protect ordinary investors from taking huge risks in making investment due to the lack of such understanding of the financial investment instruments. Professional investors are;

a. The State; b. The Bank of Korea; c. Financial institutions specified by Presidential Decree; ref. Enforcement Decree of FSCMA article 10 (Scope of Professional

Investors) d. Stock-listed corporations: Provided, That trading OTC derivatives with a financial investment business entity shall be limited

to cases where an investor notifies the financial investment business entity in writing of its willingness to be treated as a professional investor; and

e. Other persons specified by Presidential Decree.In May 2012, Republic of Korea will launch a QIB market which is based on an exempt regime for Professional Investors.

Malaysia The term - Sophisticated Investor is not explicitly defined in the Capital Markets and Services Act 2007 (CMSA). However, Schedules 6 and 7 of the CMSA exempt these types of issues and offers to so-called sophisticated or professional investors and their transactions from prospectus requirements. In an effort to promote the Malaysian debt securities and Sukuk market whilst enhancing the breadth and depth of investment options on the Malaysian capital market, debt securities and Sukuk can now be listed on Bursa Malaysia under a new exempt regime by both listed and non-listed issuers. This framework is applicable to debt securities and Sukuk that are issued, offered or subscribed in accordance with section 229(1) and section 230(1) of the CMSA (i.e., an issue, offer or invitation of debenture to investors who do fall within Schedule 6 and Schedule 7 of the CMSA). This regime especially caters to issuers who intend to list their debt securities and Sukuk for listing status and profiling purpose. The targeted groups of investors for these securities are sophisticated or professional investors and not retail investors. By an exempt regime, it means that the debt securities or Sukuk which are listed on the Exchange will not be quoted nor traded on the Exchange. As stated above, under the exempt regime, prospectus exemption is adapted to the offers of bonds to sophisticated investors. See below for Quick Reference of Breakdown for Sophisticated Investors based on the Public Consultation Paper No. 1/2010 dated 19 March 2010.

Sophisticated InvestorSophisticated

InvestorProfessional

InvestorQualified Investor

• Aunittrustschemeorprescribedinvestmentscheme; ü

• AholderofaCapitalMarketsandServicesLicensewhocarriesonthebusiness of dealing in securities;

ü ü

• AholderofaCapitalMarketsandServicesLicensewhocarriesonthebusiness of fund management;

ü ü

• TheaggregateconsiderationfortheacquisitionisnotlessthanRM250,000 or its equivalent in foreign currencies for each transaction whether such amount is paid for in cash or otherwise;

ü

• AnindividualwhosetotalnetpersonalassetsexceedRM3millionoritsequivalent in foreign currencies;

ü ü

• AcorporationwithtotalnetassetsexceedingRM10millionoritsequivalent in foreign currencies based on the last audited accounts;

ü ü

• AlicensedoffshorebankundertheOffshoreBankingAct1990; ü ü

• AlicensedoffshoreinsurerundertheOffshoreInsuranceAct1990; ü ü

• AlicensedinstitutionundertheBankingandFinancialInstitutionAct1989 or an Islamic Bank under the Islamic Banking Act 1983;

ü

• AninsurancecompanyregisteredundertheInsuranceAct1996; ü

a. A statutory body established by an Act of Parliament or an enactment of any State;

ü

b. A pension fund approved by the Director General of Inland Revenue: ü



85



Professional or Institutional investors RemarksPhilippines 1. Under the Securities and Exchange Commission (SEC) Memorandum Circular No.14, Series of 2006, the Rules Governing the

Over-the-Counter (OTC) Market (OTC Rules), “qualified investor” refers to any of the qualified buyers defined under section 10 (10.1 (L)) of the Securities Regulatory Code (SRC), any of the institutional accounts defined under SRC Rule 52.1, 6, D, or such other person declared by the SEC by rule or order as a qualified investor. In doing so, the SEC takes into account the person’s net worth or financial background would allow him or her to bear the risk that may arise from participating in an OTC market. Pursuant to its authority prescribed under the SRC, the SEC issued SEC Memorandum Circular No.6, Series of 2007, “Definition of Qualified Buyers (Qualified Buyer Rules) under section 10 of the SRC” to prescribe regulations on determining individual or juridical persons that may be registered as qualified buyers.

A qualified individual buyer shall be a natural person who: a. Has a minimum annual gross income of PHP25 million at least 2 years prior to registration, or a total portfolio in securities

of at least PHP10 million registered with the SEC, or a personal net worth of at least PHP30 million; and b. Has been engaged in securities trading in his personal capacity, or through a fund manager, for a period of 1 year, or held

for at least 2 years a position of responsibility in any professional or business entity that requires knowledge or expertise in securities trading.

A qualified institutional buyer shall have: a minimum annual gross income of PHP100 million at least 2 years prior to registration, or a total portfolio in securities of at least PHP60 million registered with the SEC, or a personal net worth of at least PHP100 million. Investors who do not qualify under the definition of a qualified investor are considered public or retail investors.2. Debt securities may not be offered for sale to the public, unless these securities are registered in accordance with sections 8

(SRC Rule 8.1) and 12 (SRC Rule 12.1) of the SRC. However, securities that are exempt from registration under section 9 (Exempt Securities) (SRC Rule 9.2) and section 10 (Exempt Transactions) (SRC Rule 10.1) of the SRC, respectively, may be offered for sale to the public.

Here, SRC Rule means “Implementing Rules and Regulations of the Securities Regulation Code.”SRC Section 10.1 (k) mentions that the sale of securities by an issuer to fewer than twenty (20) persons in the Philippines during any 12-month period is an exempt transaction. SRC Section 10.1 (k) is known as Private Placement in Philippines.SRC Section 10.1 (L) mentions that the sale of securities to any number of the qualified buyers is an exempt transaction.Inrelationtothis,the‘QualifiedInstitutionalBuyer’conceptandthecriteriaforinstitutionalvs.individualprofessionalinvestorswerelaid out (added) by the SEC in 2007 through Qualified Buyer Rules, as stated above.3. Qualified Buyer are as follows:

a. Banks;b. Registered investment houses;c. Insurance companies;d. Pension funds or retirement plans maintained by the Government of the Philippines or any of its political subdivisions, or

managed by a bank or other persons authorized by the Bangko Sentral ng Pilipinas to engage in trust functions;e. Investment companies; orf. Other persons as the SEC may determine, by rule, as qualified buyers on the basis of financial sophistication, net worth,

knowledge and experience in financial and business matters, or amount of assets under management.Exempt Transactions Requiring Notice: Notice of exemption on SEC Form 10-1 shall be required in an offering or distribution of securities under section 10.1(k) and (L) of the SRC.

Singapore In Singapore, a public offer of bonds must be accompanied by a prospectus that is lodged with and registered by the Monetary Authority of Singapore (MAS), unless an exemption applies. The exemptions to the prospectus requirements include exemptions for offers that are made only to institutional investors and accredited investors, and personal offers where the total amount raised within any 12-month period does not exceed USD5 million.Definition of Accredited Investor and Institutional Investor:1. Accredited investor: Under section 4A: Specific classes of investors of the Securities and Futures Act (SFA) (Chapter 289),

an “accredited investor” is defined as:a. an individual whose net personal assets exceed SGD2 million, or whose income in the preceding 12 months is not less

than SGD300,000;b. a corporation with net assets exceeding SGD10 million in value as determined by the most recent audited balance sheet

of the corporation, or where the corporation is not required to prepare audited account regularly, a balance sheet of the corporation certified by the corporation as giving a true and fair view of the state of affairs of the corporation;

c. the trustee of a trust; ord. Such other person as the Authority may prescribe.

2. Institutional investor: Under section 4A: Specific classes of investors of the SFA, “Institutional investor” is defined as:a. a bank that is licensed under the Banking Act;b. a merchant bank that is approved as a financial institution under section 28 of the Monetary Authority of Singapore Act;c. a finance company that is licensed under the Finance Companies Act;d. a company or society registered under the Insurance Act as an insurer;e. a company licensed under the Trust Companies Act;f. the Government;



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Professional or Institutional investors Remarksg. a statutory body;h. a pension fund or collective investment scheme;i. the holder of a capital markets services license for dealing in securities, fund management, providing custodial services for

securities, real estate investment trust management, securities financing, or trading in futures contracts;j. a person (other than an individual) who carries on the business of dealing in bonds with accredited investors or

expert investorsk. the trustee of a trust; orl. Such other person as the MAS may prescribe.

Thailand There is no defined concept of professionals; it can be assumed that wholesale institutional investors represent the professionals. There is a concept of institutional Investors and high net worth investors in Thailand. Definition of Institutional Investors and high net worth Investors are clearly defined in the Notification of the Securities and Exchange Commission No. KorChor.5/2552.These concepts are related to the rule of exemption of the full disclosure based regulations. 1. “Institutional investors” means:

i. Commercial banks; ii. Finance companies; iii. Securities companies for management of proprietary portfolios or private funds or investment projects established under

laws governing finance business, securities business and credit foncier business; iv. Credit foncier companies; v. Insurance companies; vi. Government units and state enterprises under laws governing budgetary procedures or any other juristic persons

established under specific laws; vii. Bank of Thailand; viii. International financial institutions; ix. Financial Institutions Development Fund; x. Government Pension Fund; xi. Provident funds; xii. Mutual funds; xiii. Foreign investors with the same characteristics as investors under (1) to (12), mutatis mutandis;

2. “High net worth investors” means: Individual persons having THB40 million baht (about USD1.3 million) or more of assets, excluding liabilities of such persons; Juristic persons having THB200 million baht or more in assets as recorded in the latest audited financial statements.

Viet Nam Professional securities investors mean commercial banks, financial companies, financial leasing companies, insurance organizations and securities trading organizations. (Article 6. Definition of terms in the Securities Law 2006)

a The specified investors listed in (d.) above may opt out of the status as specified investors by an agreement with the financial instruments business operator, etc. Corporations and individuals that are not included in any one of (a.) to (d.) above may opt in by an agreement with the financial instruments business operator, etc. To become a specified investor, an individual is required to have net asset of JPY300 million yen or more, financial assets of JPY300 million or more, and an investment experience of at least 1 year.


XXIII. Definition of Public Offering (and Private Placement or Exempt Regime)

Table 23. Definition of Public Offering (and Private Placement or Exempt Regime)

Jurisdiction Details of Public Offering (and Private Placement)People’s Republic of China (PRC)

The “Self-regulatory Rules for Inter-bank Bond Market Non-financial Enterprise Debt Instrument on Private Placement” provides for the entire process involved in private placement instruments including issuance, registration, trading, and information disclosure, among others. Exempt Regime is not applied in PRC.In the Inter-bank Bond Market, there are mainly two ways to issue bonds: public offering and negotiating issuance for targeted investors. Public offering:In the public offering bond market of the PRC, the bonds can be issued in two ways: Issue by tender (public tender) through the issue system of the People’s Bank of China and book building. Non-financial enterprises that satisfy the relevant provisions of Circular of the People’s Bank of China (Financial Market Department) on Matters Concerning the Issue of Bonds by Tender through the Issue System of the People’s Bank of China (BSC [2011] No. 11) can also issue the bond by public tender.Negotiating Issuance - Private placement with targeted investors:(Generally speaking Private placement related disclosure rules are sometimes different from the public placement based disclosure rules).



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Jurisdiction Details of Public Offering (and Private Placement)

Issuers negotiate with underwriters on issuance conditions of bonds, subscription costs and bondholders responsibilities such as coupon rate, price, tenor, interest payment, amount and payment date, and sign an underwriter agreement. This type of issuance considers market factors and can therefore better reflect the market conditions. This type of issuance is an effective supplement of market-oriented bond issuance based on the market’s demand. Under this method, based on the needs of the market, the issuing body will make decision in consultation with the bond subscription coupon bonds, price, term, interest-bearing manner, amount, payment date, subscription conditions, subscription costs and obligations of the Purchaser. Therefore the issuance with this method will better reflect needs of particular investors rather than prevailing market conditions. The market-oriented ways of issuing bonds is an effective supplement method.

Hong Kong, China Methods of issuing Corporate Bonds:Private entities generally adopt one of the following methods to issue corporate bonds: a. Public offering for bonds intended to sell to the public; or b. Private placement for bonds intended to sell to a small group of investors. There are some differences in the requirements for the two methods. For instance, a more comprehensive and detailed prospectus is generally required for public offer whereas a relatively simple form of offer document or term sheet suffices for private placement. For details, refer to Part 2 of the Companies Ordinance.For bonds to be listed on the Hong Kong Stock Exchange (HKSE), corporates should also observe the requirements of the Listing Rules, as well as Parts II and XII of the CO including section 44B.

Indonesia a. Exemptions for Private Issuance (Private Placement):A securities offering that does not meet the criteria for public offering (so-called private placement) is exempted from the obligation to submit Registration Statements to Bapepam-LK, and thus exempted from all offering requirements under Bapepam-LK rules. The criteria for public offering, which is offered within the jurisdiction of Indonesia, or offered to Indonesian citizens through mass media, or offered to more than 100 parties or sold to more than 50 parties in a certain limited amount at a certain time, is covered under article 1, No. 1a.15 of the Elucidation of the Capital Market Law.A Sustainable Public Offering (so-called Shelf Registration) is an initial public offering (IPO) for debit securities instrument (EBU) and/or Sukuk which are effected sustainably as regulated in Peraturan Bapepam dan LK Nomor IX.A.15 tentang Penawaran Umum Berkelanjutan. Sustainable Public Offering (Shelf Registration) is chosen in order to provide convenience for the issuer or public company with good performance to facilitate the IPO of EBU and/or Sukuk on a regular basis. Sustainable Public Offering should be implemented no longer than 2 years since the effectiveness of Registration Statement with certain criteria for both the issuer and securities. There is a Private Placement Market for medium-term notes (MTNs) and corporate bonds which could be registered by the central securities depository, Indonesian Central Securities Depository. The Indonesian regulatory framework does not specifically address the registration of MTN, but it regulates the registration procedures for bonds and Sukuk. In order to facilitate the issuance of MTN, which allows a firm to issue a series of bonds within a particular period with only one registration statement submission, Bapepam-LK released a new regulation on shelf-registration. Under the current regulatory arrangement, if bond issuance by non-residents is publicly offered, it must follow the procedures similar to the issuance by domestic firms, without any exception. This may hinder foreign issuers due to especially the requirements on domestic supporting professionals.

Japan A public offering is generally subject to requirements to disclose the solicitation documents stipulated in the Financial Instruments and Exchange Act (FIEA), whereas a private placement (PP) is not. Disclosure requirements by way of filing a Securities Registration Statement and delivering a Prospectus under the FIEA and a related Order for Enforcement and Cabinet Office Ordinances are applicable to the solicitation of the public, i.e., public offering, for either an initial issue or sale of existing securities. The following categories are not deemed to be a public offering: (a) to a small number of investors (small number-private placement is a private placement to less than 50 people.) or (b) to qualified institutional investors (the QII-PP) or (c) to specified investors (the Offer to Specified Investor).

Republic of Korea Public offerings generally refer to actions with the aim of selling to multiple ordinary investors. The Financial Investment Service and Capital Market Act (FSCMA) define a public offering as public offering and public sale. The term “public sale” in the FSCMA refers to gathering 50 or more investors, as calculated by a formula prescribed by Presidential Decree and FSC Regulation (Regulation on Issuance, Public Disclosure, etc. of Securities), to make an offer to sell or invite offers to purchase securities already issued (FSCMA Article 9[9]). In other words this means soliciting 50 or more investors (the sum of those who have received recommendations) that have not made, applied to, or bought the same type of securities as the relevant securities being offered within 6 months of the day offers to buy are made.

Malaysia The Securities Commission (SC) and Bank Negara Malaysia introduced an ‘exempt regime’, reducing onerous listing requirements, including possibly fee waivers; this is most used for Sukuk listings.•InadditiontoAAA(localrating)exemption,aninternationalratingBBB+orbettermayalsoqualifyissuerfordisclosureexemption.•CMSASchedules6and7regulateexemptionsofdisclosure,suchasprofessional(here:‘sophisticatedinvestors’),including

insurance companies and high net worth individuals; details are available on the SC website.



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Jurisdiction Details of Public Offering (and Private Placement)Philippines •Differentiationofpublicorprivateplacement:>19investors,historicdriver,possiblybecauseoftaxationissue

•Allissuesrequire‘RegistrationStatement’totheSecuritiesandExchangeCommission(SEC),constitutesbasicdisclosureexemptions are granted for securities issued only to primary institutional lenders or qualified buyers as defined in the Securities Regulation Code (SRC) sections 9 and 10, and the SRC Implementing Rules and Regulations.

•ExemptissuesaredefinedinSRCsection9;exemptsecuritiesaredefinedinSRCsection10;section10kmentionsdistinctionof<19investors;10lmentions‘QualifiedInstitutionalBuyer’(QIB)concept;thecriteriaforinstitutionalversusindividualprofessionalinvestors was laid out (added) by SEC in 2007

•Noonwardsaleofsection10securitiestonon-QIB.

Singapore Public offering is the selling of registered securities to the broad market, rather than to a select group of investors. In Singapore, a public offer of bonds must be accompanied by a prospectus that is lodged with and registered by the Monetary Authority of Singapore (MAS), unless an exemption applies. Strictly speaking, the Bill removed the concept of “offer to the public” from the Securities and Futures Act (SFA). Instead, a prospectus will be required for all offers of investments unless they are specifically exempted. As a basic principle, such exemptions should only be given in limited circumstances where the cost of issuing a prospectus is not justified by the benefits of greater disclosure and investor protection.The exemptions to the prospectus requirements include exemptions for offers that are made only to institutional investors and accredited investors, and personal offers where the total amount raised within any 12-month period does not exceed USD5 million. Issuers of bonds that are offered to retail investors would normally seek a listing of these bonds on the Singapore Exchange and the bonds are normally in small denomination. Notices of bond offerings by statutory boards, domestic and foreign issuers are generally published in the newspapers or on the issuer’s website. They outline issuance details such as auction dates, size and type of issue. General public offerings can be accessed through a prospectus database available at the MAS website under the Offers and Prospectuses Electronic Repository and Access tab.Brief Summary of the Exemptions from Prospectus Requirementsa. Offers those are made to institutional investors or accredited investors and are not accompanied by public advertisements. (SFA

274+275)b. Private placement offers made to no more than 50 persons (See above private placement) (SFA 272B, etc.)c. An entity whose shares are already listed on the SGX may use an Offer Information Statement (OIS), instead of a prospectus,

when issuing new types of securities such as bonds. An OIS has fewer disclosure requirements.d. Institutions offering continuously issued structured notes do not need to lodge and register a pricing statement with the MAS;

the base prospectus and a transaction note, setting out the offer details prior to the purchase or subscription and a confirmation receipt thereafter, to the investors at the time of offer are sufficient.

e. Small Offer: the total amount raised by the person from such offers within any period of 12 months does not exceed USD5 million (or its equivalent in a foreign currency), etc. (SFA 272 etc.)

Private placement is the selling of unregistered securities directly, where offer is made to not more than 50 investors within a 12-month period. Private bond placements sometimes are not listed on a stock exchange. An issuer who offered the bonds through private placement can still seek a listing on SGX.Many of primary issuance is made in the form of private placement offers.Many Singapore dollar corporate bonds are placed privately at the issuer’s or investor’s (reverse enquiry) initiative.

Thailand 1. The bond can be offered for sale by way of Public Offering (PO) or Private Placement (PP). PP generally means to offer for sale to institutional investors (II), high net worth investors (HNWI) and specific investors.

2. Approval from the Securities and Exchange Commission (SEC) is required for the offer for sale by way of a Public Offering. A full filing form (a specific form prescribed by the SEC) and draft prospectus have to be submitted to the SEC.

3. PP (Narrow Distribution less than 10 people or Small Size) is exempt from filing requirement. 4. PP (II&HNWI) is exempt from full filing requirement. (Light requirement remains)5. The concept of II or Qualified Foreign Institutional Investor (QFII) does not only apply to securities available for sale in the

Exchange Market but also applies to debentures issued by way of private placement.6. A credit rating is also required for an offer for sale by way of a PO and PP.7. The newly issued bond must be registered with the Thai Bond Market Association.8. A bond representative is needed for an offer for sale by way of a PO.9. An annual report is required to be filed with the SEC.

Viet Nam Public offering means an offering of securities according through one of the following methods:(a) Via mass media, including Internet;(b) Offering of securities to 100 investors or more, excluding professional investors;(c) Offering to an unspecified number of investors.Non-public offering (PP) of securities means an organization offers securities to less than 100 investors, not including professional security investors and not using mass media or the Internet.



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XXIV. Existence of Professional Investors-Only Market

Table 24. Existence of Professional Investors-Only Market

Jurisdiction Status Quo of the Professional Investors-Only MarketPeople’s Republic of China

Does not exist. Inter-bank Bond Market is a non-retail market, but that does not mean that it is a professional market.

Hong Kong, China The Hong Kong Exchanges and Clearing Limited has performed market consultation on some proposed changes to the requirements for the listing of debt issues to professional investors only in December 2010 and the Rule amendments were effected in November 2011.

Indonesia Does not exist.

Japan TOKYO PRO-BOND market with listing on the TOKYO AIM. Offerees are limited to Specified Investors (the Offer to SI). This is a new market which is exempted from full disclosure requirements for public offerings.

Republic of Korea The Qualified Institutional Buyer (QIB) market and trading system will be launched in 2012.

Malaysia The Securities Commission and Bank Negara Malaysia introduced the ‘exempt regime’, reducing onerous listing requirements, including possibly fee waivers; this is most used for Sukuk listings.• InadditiontoAAA(localrating)exemption,aninternationalratingBBB+orbettermayalsoqualifyissuerfordisclosure

exemption.• CapitalMarketandServicesAct2007Schedules6and7regulateexemptionsofdisclosure,suchasprofessional(here:

‘sophisticatedinvestors’),includinginsurancecompaniesandhighnetworthindividuals.

Philippines Exemptions are granted for securities issued only to primary institutional lenders or qualified buyers as defined in the Securities Regulation Code (SRC) sections 9 and 10, and the SRC Implementing Rules and Regulations.

Singapore There is a market which is exempted from Prospectus Requirements:a. Offers are made to institutional investors or accredited investors and are not accompanied by public advertisements.

(Securities and Futures Act [SFA] 274+275)b. Private placement offers made to no more than 50 persons (See above private placement) (SFA 272B etc.)c. An entity whose shares are already listed on the Singapore Exchange may use an Offer Information Statement (OIS), instead

of a prospectus, when issuing new types of securities, such as bonds. An OIS has fewer disclosure requirements.d. Institutions offering continuously issued structured notes do not need to lodge and register a pricing statement with the

Monetary Authority of Singapore; the base prospectus and a transaction note, setting out the offer details prior to the purchase or subscription and a confirmation receipt thereafter to the investors at the time of offer are sufficient.

e. Small Offer: the total amount raised by the person from such offers within any period of 12 months does not exceed SGD5 million (or its equivalent in a foreign currency), etc. (SFA272 etc.)

Thailand Does not exist explicitly. But, Private Placement (PP) is exempt from full filing requirement. a. Private Placement (PP) generally means to offer for sale to institutional investors (II), high net worth investors (HNWI), and

specific investors.b. Approval from the Securities and Exchange Commission (SEC) is required for the offer for sale by way of a Public Offering (PO).

A full filing form (a specific form prescribed by the SEC) and draft prospectus have to be submitted to the SEC.c. PP (Narrow Distribution less than 10 persons or Small Size) is exempt from filing requirement. d. PP (II&HNWI) is exempt from full filing requirement. (Light requirement remains)e. The concept of II or Qualified Foreign Institutional Investor (QFII) does not only apply to securities available for sale in the

Exchange Market but also applies to debentures issued by way of private placement.f. A credit rating is also required for an offer for sale by way of a PO and PP.g. The newly issued bond must be registered with the Thai Bond Market Association.h. A bond representative is needed for an offer for sale by way of a PO. Not necessary for PP.i. An annual report is required to be filed with the SEC.

Viet Nam Does not exist. But, there is so far a concept of the institutional investors. 1. Item 11, article 6 of Securities Law No. 70/2006/QH11 defines “institutional investors [as] commercial banks, financial

companies, financial leasing companies, insurance organizations and securities trading organizations.”2. Not clear about the concepts of wholesale and retail in this market. 3. Private placement (non-public offering) concept is not clearly defined in the laws and regulations in Viet Nam.4. Private placement (non-public offering) is not regulated in Viet Nam.


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XXV. Market Capitalization – Size of the Local Currency Bond Market (as of March 2011)

Table 25. Market Capitalization – Size of Local Currency Bond Market (as of March 2011) ($ billion)

Jurisdiction Government Corporate TotalPeople’s Republic of China 2,369.8 696.4 3,066.2

Hong Kong, China 87.6 78.7 166.3

Indonesia 103.9 13.9 117.8

Japan 10,425.5 1,087.3 11,512.8

Republic of Korea 524.3 687.2 1,211.5

Malaysia 160.6 108.4 269.0

Philippines 63.6 9.4 73.0

Singapore 105.7 84.9 190.6

Thailand 180.9 44.1 225.0

Viet Nam 14.2 1.4 15.6Source: AsianBondsOnline.

XXVI. Size of Foreign Currency Bond Market (as of March 2011)

Table 26. Size of Foreign Currency Bond Market (as of March 2011) ($ billion)

Jurisdiction Government Corporate TotalPeople’s Republic of China 13.0 58.7 71.7

Hong Kong, China 1.6 70.8 72.4

Indonesia 18.0 17.3 35.3

Japan 33.6 78.2 111.8

Republic of Korea 21.7 110.7 132.4

Malaysia 3.0 22.2 25.2

Philippines 34.1 7.3 41.4

Singapore 0.0 36.4 36.4

Thailand 1.4 6.7 8.1

Viet Nam 2.3 0.1 2.4

Total 128.7 408.4 537.1Source: AsianBondsOnline.

XXVII. Islamic Finance related Issues

Table 27. Islamic Finance-Related Issues

JurisdictionExistence of the

Islamic Finance Market ExplanationPeople’s Republic of China No

Hong Kong, China Yes 1. Regulatory framework for Islamic Finance: Save for the relevant laws relating to tax issues, the regulatory and legal framework for Islamic finance largely follows the one applicable to conventional debt instruments.

2. Type of instruments available, segments, tenure, etc.: Though the market infrastructure, regulatory and legal framework is in place, the market remains inactive for the time being probably due to the tax issues.


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Islamic Finance Market Explanation3. Basic market infrastructure required to facilitate Islamic Finance: Enhancements have

been made to US dollar and euro real-time gross settlement systems as well as Central Moneymarkets Unit (CMU) in Hong Kong to facilitate participating members to identify transactions related to Islamic finance and to segregate Islamic-related funds from others.

4. Tax-related issues: The key tax issue relating to Islamic bonds is that the arrangement operates in the form of equity finance but is in substance similar to debt finance. In Hong Kong, tax law treats debt and equity differently. For instance, interest income and interest expenses arising from a debt finance arrangement may be taxable and deductible subject to certain conditions. In contrast, dividend income and distributions arising from an equity finance arrangement are generally not taxable or deductible. As a result of the heavier tax burden, issuing and/or investing in Islamic bond may be less favorable than issuing and/or investing in conventional debt instruments. The Government is studying how to take forward amendments to the relevant laws to facilitate development of a local Islamic bond market by leveling the playing field for Islamic bonds vis-à-vis their conventional counterparts as far as tax arrangements are concerned.

Indonesia Yes According to Bapepam-LK Rule No IX.A.13 concerning Issuance of Shari’a Securities, Sukuk are Shari’a Securities in a form of certificate or proof of ownership which have the same value and represent a participation unit which is not separated from or consists of underlying assets.A. Islamic bonds (Sukuk) in Indonesia have had the following fatwa and legal basis:1. Fatwa No. 32/DSN-MUI/IX/2002 concerning Shari’a Bonds2. Fatwa No. 33/DSN-MUI/IX/2002 concerning Shari’a Mudharabah Bonds3. Fatwa No. 40/DSN-MUI/X/2003 concerning the Capital Market and the General Guidelines for

Implementation of Shari’a in the Capital Market4. Fatwa No. 41/DSN-MUI/III/2004 concerning Shari’a Ijarah Bonds5. Fatwa No. 59/DSN-MUI/V/2007 concerning conversion of Shari’a Mudharabah Bonds6. Fatwa No. 69/DSN-MUI/VI/2008 concerning of the Government Shari’a Securities (Surat

Berhaga Syariah Negara, SBSN)7. Fatwa No. 70/DSN-MUI/VI/2008 concerning the method of SBSN Issuance8. Fatwa No. 71/DSN-MUI/VI/2008 concerning of Sale and Lease Back of Ijarah SBSN9. Fatwa No. 69/DSN-MUI/VI/2008 concerning SBSN Ijarah Sale and Lease Back

B. Government Sukuk:Domestic Issuance:1. Book Building (Finance Minister Regulation No. 118/PMK.08/2008 regarding Domestic

Sukuk Issuance In Primary Market Through Bookbuilding;2. Auction (Finance Minister Regulation No. 11/PMK.08/2009 regarding Government Sukuk

Auction In Primary Market); 3. Book Building (Finance Minister Regulation No. 218/PMK.08/2008 regarding Retail Sukuk In

Primary Market); Changes: No. 10/Pmk.08/2007; 172/Pmk.08/2010;4. Private Placement (Finance Minister Regulation No. 75/PMK.08/2009 regarding Government

Sukuk Private Placement Issuance)

International Issuance:1. Book Building/Public Offering Finance Minister Regulation No. 152 /PMK.08/2008 regarding

Foreign-Denominated Sukuk Issuance In International Market; the changes: No. 129/PMK.08/2009;

2. Private Placement (Finance Minister Regulation No. 75/PMK.08/2009 regarding Government Sukuk Private Placement Issuance).

Japan Yes Japan has strong economic ties with Islamic countries, which are demonstrated by huge cash outflow from Japan to those countries every year. Facilitating the reverse flow of investment from Islamic countries towards Japan and other Asian regions is very meaningful for a balanced growth of the global economy, particularly in the age of a high oil price. In 2007, a number of Japanese public and private institutions started to explore Islamic finance as one of the means to attract Islamic investors to invest in Japan by participating in the Islamic Financial Services Board (IFSB), an international standard-setting organization for the Islamic finance services industry headquartered in Malaysia, as observer.




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Islamic Finance Market ExplanationFor the time being, Japan is not equipped with a full-ranged regulatory framework for operating Islamic Finance. However, in December 2008, the Japanese banking and insurance business regulation was relaxed to allow subsidiaries of Japanese banks and insurance companies to provide certain Islamic Finance services in such forms as Murabahah (cost-plus sale) or Ijarah (leasing) by amending the Ordinance for Enforcement of the Banking Law and the Insurance Business Law. At present, there are a few cases where subsidiaries of Japanese banks are applying for the regulatory authorization required for conducting Islamic financial operations overseas. Issues of Shari’a compliance, or that of supervision of the market, have not yet been taken up for discussion in Japan. In 2010, further steps were contemplated to facilitate Sukuk issuance by Japanese domestic corporations (or other public or quasi-public entities) under the Japanese legal system. Since the latter half of 2010, the momentum within the Japan Financial Services Agency accelerated. The National Diet passed a bill on 17 May 2011 to facilitate Sukuk issuance in Japan by amending the Asset Securitization Act. The bill is accompanied by amendments on relevant tax legislation with a view to creating a level tax playing field compared to conventional bonds.

Republic of Korea No

Malaysia Yes The Malaysian Sukuk market has shown remarkable progress since its introduction in 1990. Malaysia has successfully created a niche market in this area. It is estimated that from January to September 2011, based on Islamic Finance Information Service, 70% of the total global Islamic bonds that have been issued were issued in Malaysia, making Malaysia one of the world’s largest Sukuk markets. In 2010, Sukuk issuance amounted to MYR 30 billion, accounting for 56% of total Sukuk issuance. In 2009 and 2010, Sukuk were extremely popular with issuers and investors alike, eclipsing conventional bonds and accounting in both years for more than 50% of issuance. Demand for Islamic paper by Islamic and conventional investors was strong, and major issuers, in particular the toll road concessionaires and power supply companies, took advantage of lower issuance costs as the demand led to more competitive bidding. Issuers are no longer constrained by the legal concept of debentures (debt-based), as required for conventional products, following the implementation of the latest Sukuk Guidelines made effective by the Securities Commission in August 2011.

Philippines No

Singapore Yes In 2005, Singapore was accepted as a full member of the IFSB, an international body based in Malaysia that defines regulatory and supervisory standards governing Islamic financial services. In January 2009, Singapore launched its first Islamic bond program worth SGD200 million.

Thailand Yes Thailand is at the early stage of developing an Islamic bond market. The specific regulations for issuance and offering of Sukuk were only announced in early January 2011. The regulatory framework falls under the Securities and Exchange Commission Act and Trust for Transactions in Capital Market Act, respectively.

Viet Nam NoSource: ADB Consultants, based on research materials and market visit information.

Table 27 continuation


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Items to be included in the SF1 Market Guides for the region

Points for comparative analysis based on the questionnaire.

1. Governing Law for Corporate Bonds Issuance2. Definition of Securities (Bonds)3. Competent Authority (Regulator)4. Issuing Approval Method5. Role of the SROs6. Purpose of the Listing of Bonds (e.g., profiling or real listing)7. Obligation for the Listing of Bond8. Main Trading Places (Over the Counter or Exchange)9. Necessity of the Credit Rating10. Method of Registration of Bonds11. Status of the Bonds (Bearer or Registered)12. Form of the Bonds (Scripless or Physical)13. Status of the Scripless Bonds (Complete Dematerialized or Immobilized)14. Existence of the exchangeability of the Scripless Bond to the Physical Bonds15. Method of Transfer of Interest in Bonds16. Finality of Settlement17. Legal Basis and Definition of “Settlement and Clearing”18. Existence of the Omnibus Accounts19. Existence of the Nominee Concept20. Regulators’ Policy related to the necessity of Disclosure of Ultimate Beneficially Owner21. Documentation Language22. Definition of the Payment Default23. Bankruptcy Procedures24. Existence of the Meeting of Bondholders25. The Way of Trustee (Bond Representative or Commissioned Persons) System26. The definition of Professional or Institutional Investors27. Public Offering Market (Full Disclosure) Rules and Regulation28. Private Placement Rules and Definition of Professional (Institutional) Investor and High Net Worth Investors (HNWI) 29. Islamic Finance-Related Issues

Appendix


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Contact (ADB Consultant, Principal Author):

Prof. Shigehito InukaiFaculty of Law, Waseda University1-6-1, Nishiwaseda, Shinjuku-ku, Tokyo, 169-8050Tel & Fax (Direct): + 81-(0)3-3202-2472Mobile: +81-(0)80-3360-7551E-Mail: [email protected]

Reference

Section 11: Viet Nam Bond Market Guide


79

Article 3

This Decision shall be of full force and effect fifteen (15) days from the date of its publication in the Official Gazette and shall replace Decision 163-2003-QD-TTg of the Prime Minister dated 5 August 2003 on approval of the strategy for development of the Vietnamese securities market up to 2010.

Article 4

Ministers, Heads of ministerial equivalent bodies, Heads of Government bodies, Chairmen of People’s Committees of provinces and cities under central authority and Heads of relevant bodies shall be responsible for implementation of this Decision.

Prime MinisterNGUYEN TAN DUNG

Source: Hanoi Stock Exchange. http://www.hsx.vn/hsx_en/Modules/Phapquy/VAN_BAN_PHAP_QUY_FILE_download.aspx?ID_FILE=1427&TEN_FILE=Dn128gv2Aug07VietnamCapitalMarket.pdf

Table A1.1 continuation

Section 11: Viet Nam Bond Market Guide80


Annual Report 2010 Hanoi Stock Exchange

Prof. Shigehito Inukai Faculty of Law, Waseda University 1-6-1, Nishiwaseda, Shinjuku-ku, Tokyo, 〒169-8050Tel & Fax (Direct): + 81-(0)3-3202-2472Mobile: +81-(0)80-3360-7551E-Mail: [email protected]

References